What changed in this filing

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Item 1. Financial Statements

2020-08-07 compared with 2020-05-11 · 557 added, 525 removed, 1122 unchanged (49% of the section changed)

9 unchanged sentences

Condensed Consolidated Statements of Financial Condition (Unaudited)

(in thousands, except share data)

(in thousands, except share data) June 30,

2020 December 31,

Cash and cash equivalents $ 670,770 $ 732,164

7 unchanged sentences

Receivables from customers 275,506 103,531

Property, equipment and capitalized software (net of accumulated depreciation of $466,928 and $457,229 as of March 31, 2020 and December 31, 2019, respectively)

Property, equipment and capitalized software (net of accumulated depreciation of $ 433,060 and $ 457,229 as of June 30, 2020 and December 31, 2019, respectively)

114,080 116,089

Operating lease right-of-use assets 294,531 314,526

Intangibles (net of accumulated amortization of $238,197 and $219,239 as of March 31, 2020 and December 31, 2019, respectively)

Goodwill 1,148,926 1,148,926

Intangibles (net of accumulated amortization of $ 257,151 and $ 219,239 as of June 30, 2020 and December 31, 2019, respectively)

491,726 529,638

Deferred tax assets 195,844 214,671

Other assets ($49,068 and $48,966, at fair value, as of March 31, 2020 and December 31, 2019, respectively)

Other assets ($ 53,642 and $ 48,966 , at fair value, as of June 30, 2020 and December 31, 2019, respectively)

257,352 252,640

Total assets $ 10,288,875 $ 9,609,370

Liabilities and equity

14 unchanged sentences

Stockholders' equity

Class A common stock (par value $0.00001), Authorized — 1,000,000,000 and 1,000,000,000 shares, Issued — 122,585,460 and 120,435,912 shares, Outstanding — 120,406,689 and 118,257,141 shares at March 31, 2020 and December 31, 2019, respectively

Class B common stock (par value $0.00001), Authorized — 175,000,000 and 175,000,000 shares, Issued and Outstanding — 0 and 0 shares at March 31, 2020 and December 31, 2019, respectively

Class C common stock (par value $0.00001), Authorized — 90,000,000 and 90,000,000 shares, Issued and Outstanding — 12,162,851 and 12,887,178 shares at March 31, 2020 and December 31, 2019, respectively

Class D common stock (par value $0.00001), Authorized — 175,000,000 and 175,000,000 shares, Issued and Outstanding — 60,091,740 and 69,091,740 shares at March 31, 2020 and December 31, 2019, respectively

Treasury stock, at cost, 2,178,771 and 2,178,771 shares at March 31, 2020 and December 31, 2019, respectively

Class A common stock (par value $ 0.00001 ), Authorized — 1,000,000,000 and 1,000,000,000 shares, Issued — 124,654,210 and 120,435,912 shares, Outstanding — 122,475,439 and 118,257,141 shares at June 30, 2020 and December 31, 2019, respectively

Class B common stock (par value $ 0.00001 ), Authorized — 175,000,000 and 175,000,000 shares, Issued and Outstanding — 0 and 0 shares at June 30, 2020 and December 31, 2019, respectively

Class C common stock (par value $ 0.00001 ), Authorized — 90,000,000 and 90,000,000 shares, Issued and Outstanding — 10,526,939 and 12,887,178 shares at June 30, 2020 and December 31, 2019, respectively

Class D common stock (par value $ 0.00001 ), Authorized — 175,000,000 and 175,000,000 shares, Issued and Outstanding — 60,091,740 and 60,091,740 shares at June 30, 2020 and December 31, 2019, respectively

Treasury stock, at cost, 2,178,771 and 2,178,771 shares at June 30, 2020 and December 31, 2019, respectively

( 55,005 ) ( 55,005 )

Additional paid-in capital 1,128,977 1,077,398

3 unchanged sentences

stockholders' equity 1,294,280 931,374

Noncontrolling interest 406,727 297,562

Virtu Financial, Inc.

1 unchanged sentence

Condensed Consolidated Statements of Financial Condition (Unaudited)

(in thousands, except share data)

Noncontrolling interest

(in thousands, except share data) June 30,

2020 December 31,

Total equity 1,701,007 1,228,936

Total liabilities and equity $ 10,288,875 $ 9,609,370

See accompanying notes to the Condensed Consolidated Financial Statements.

See accompanying notes to the Condensed Consolidated Financial Statements (Unaudited).

Virtu Financial, Inc.

2 unchanged sentences

Three Months Ended

June 30, Six Months Ended

(in thousands, except share and per share data) 2020 2019 2020 2019

2 unchanged sentences

Commissions, net and technology services 147,736 145,120 318,481 220,267

Other, net 4,831 ( 104 ) 5,726 ( 1,490 )

Total revenue 905,903 375,101 1,906,524 735,533

Operating Expenses:

Brokerage, exchange and clearance fees, net

Brokerage, exchange, clearance fees and payments for order flow, net 203,503 99,487 377,321 187,101

Communication and data processing 55,662 54,423 110,689 96,237

Employee compensation and payroll taxes 120,934 83,702 291,292 191,540

Payments for order flow

Interest and dividends expense 28,841 36,824 70,281 82,193

13 unchanged sentences

Earnings (loss) per share

Basic $ 1.59 $ ( 0.27 ) $ 3.39 $ ( 0.34 )

Diluted $ 1.58 $ ( 0.27 ) $ 3.38 $ ( 0.34 )

Weighted average common shares outstanding

Basic 121,527,673 112,828,240 120,642,415 110,076,375

Diluted 122,238,905 112,828,240 121,013,689 110,076,375

Net income (loss) $ 335,285 $ ( 55,485 ) $ 723,523 $ ( 69,104 )

5 unchanged sentences

Comprehensive income (loss) attributable to common stockholders $ 197,574 $ ( 29,343 ) $ 381,291 $ ( 38,152 )

See accompanying notes to the Condensed Consolidated Financial Statements.

See accompanying notes to the Condensed Consolidated Financial Statements (Unaudited).

Virtu Financial, Inc.

1 unchanged sentence

Condensed Consolidated Statements of Changes in Equity (Unaudited)

Three Months Ended March 31, 2020 and 2019

Class A Common Stock

Class C Common Stock

Class D Common Stock

Treasury Stock

Additional Paid-in Capital

Retained Earnings (Accumulated Deficit)

Accumulated Other Comprehensive Income (Loss)

Total Virtu Financial Inc.

Stockholders' Equity

Non-Controlling Interest

Three and Six Months Ended June 30, 2020 and 2019

Class A Common Stock Class C Common Stock Class D Common Stock Treasury Stock Additional Paid-in Capital Retained Earnings (Accumulated Deficit) Accumulated Other Comprehensive Income (Loss) Total Virtu Financial Inc.

Stockholders' Equity Non-Controlling Interest Total Equity

(in thousands, except share and interest data)

Shares Amounts Shares Amounts Shares Amounts Shares Amounts Amounts

Balance at December 31, 2019 120,435,912 $ 1 12,887,178 $ — 60,091,740 $ 1 ( 2,178,771 ) $ ( 55,005 ) $ 1,077,398 $ ( 90,374 ) $ ( 647 ) $ 931,374 $ 297,562 $ 1,228,936

8 unchanged sentences

Distribution from Virtu Financial to non-controlling interest — — — — — — — — — — — — ( 19,165 ) ( 19,165 )

Dividends — — — — — — — — — ( 29,602 ) — ( 29,602 ) — ( 29,602 )

Issuance of common stock in connection with employee exchanges 724,327 — — — — — — — — — — — — —

1 unchanged sentence

Balance at March 31, 2020 122,585,460 $ 1 12,162,851 $ — 60,091,740 $ 1 ( 2,178,771 ) $ ( 55,005 ) $ 1,113,447 $ 91,292 $ ( 37,999 ) $ 1,111,737 $ 416,920 $ 1,528,657

Class A Common Stock

Class C Common Stock

Class D Common Stock

Treasury Stock

Additional Paid-in Capital

Retained Earnings (Accumulated Deficit)

Accumulated Other Comprehensive Income (Loss)

Total Virtu Financial Inc.

Stockholders' Equity

Non-Controlling Interest

Share based compensation 36,771 — — — — — — — 7,839 — — 7,839 — 7,839

Treasury stock purchases ( 8,727 ) — — — — — — — — ( 360 ) — ( 360 ) — ( 360 )

Stock option exercised 404,794 — — — — — — — 7,691 — — 7,691 — 7,691

Net income (loss) — — — — — — — — — 199,142 — 199,142 136,143 335,285

Foreign exchange translation adjustment — — — — — — — — — — 3,674 3,674 2,770 6,444

Net change in unrealized cash flow hedges gains (losses) — — — — — — — — — — ( 5,242 ) ( 5,242 ) ( 3,895 ) ( 9,137 )

Distribution from Virtu Financial to non-controlling interest — — — — — — — — — — — — ( 145,211 ) ( 145,211 )

Dividends — — — — — — — — — ( 30,201 ) — ( 30,201 ) — ( 30,201 )

Issuance of common stock in connection with employee exchanges 1,635,912 — — — — — — — — — — — — —

Repurchase of Virtu Financial Units and corresponding number of Class C common stock in connection with employee exchanges — — ( 1,635,912 ) — — — — — — — — — — —

Balance at June 30, 2020 124,654,210 $ 1 10,526,939 $ — 60,091,740 $ 1 ( 2,178,771 ) $ ( 55,005 ) $ 1,128,977 $ 259,873 $ ( 39,567 ) $ 1,294,280 $ 406,727 $ 1,701,007

Stockholders' Equity Non-Controlling Interest Total Equity

(in thousands, except share and interest data)

Shares Amounts Shares Amounts Shares Amounts Shares Amounts Amounts

Balance at December 31, 2018 108,955,048 $ 1 13,749,886 $ — 69,091,740 $ 1 ( 2,178,771 ) $ ( 55,005 ) $ 1,010,468 $ 96,513 $ ( 82 ) $ 1,051,896 $ 442,803 $ 1,494,699

6 unchanged sentences

Distribution from Virtu Financial to non-controlling interest — — — — — — — — — — — — ( 37,196 ) ( 37,196 )

Dividends — — — — — — — — — ( 26,312 ) — ( 26,312 ) — ( 26,312 )

Issuance of common stock in connection with employee exchanges 240,000 — — — — — — — — — — — — —

1 unchanged sentence

Balance at March 31, 2019 109,921,498 $ 1 13,509,886 $ — 69,091,740 $ 1 ( 2,178,771 ) $ ( 55,005 ) $ 1,042,091 $ 54,723 $ ( 2,218 ) $ 1,039,593 $ 397,053 $ 1,436,646

See accompanying notes to the Condensed Consolidated Financial Statements.

Share based compensation 257,750 — — — — — — — 16,443 — — 16,443 — 16,443

Repurchase of Class C common stock — — ( 3,584 ) — — — — — — ( 96 ) — ( 96 ) — ( 96 )

Treasury stock purchases ( 90,852 ) — — — — — — — — ( 2,093 ) — ( 2,093 ) — ( 2,093 )

Stock option exercised 35,120 — — — — — — — 72 — — 72 — 72

Net income (loss) — — — — — — — — — ( 29,891 ) — ( 29,891 ) ( 25,594 ) ( 55,485 )

Foreign exchange translation adjustment — — — — — — — — — — 548 548 336 884

Distribution from Virtu Financial to non-controlling interest — — — — — — — — — — — — ( 14,891 ) ( 14,891 )

Dividends — — — — — — — — — ( 28,592 ) — ( 28,592 ) — ( 28,592 )

Issuance of common stock in connection with employee exchanges 367,900 — — — — — — — — — — — — —

Issuance of Common Stock in connection with secondary offering, net of offering costs 9,000,000 — — — ( 9,000,000 ) — — — ( 375 ) — — ( 375 ) — ( 375 )

Repurchase of Virtu Financial Units and corresponding number of Class C common stock in connection with employee exchanges — — ( 367,900 ) — — — — — — — — — — —

Issuance of tax receivable agreements in connection with employee exchange — — — — — — — — ( 644 ) — — ( 644 ) — ( 644 )

Balance at June 30, 2019 119,491,416 $ 1 13,138,402 $ — 60,091,740 $ 1 ( 2,178,771 ) $ ( 55,005 ) $ 1,057,587 $ ( 5,949 ) $ ( 1,670 ) $ 994,965 $ 356,904 $ 1,351,869

See accompanying notes to the Condensed Consolidated Financial Statements ( Unaudited ) .

Virtu Financial, Inc.

1 unchanged sentence

Condensed Consolidated Statements of Cash Flows (Unaudited)

Three Months Ended March 31,

Six Months Ended June 30,

(in thousands) 2020 2019

8 unchanged sentences

Share-based compensation 37,012 37,289

Reserve for legal matters

Deferred taxes 18,827 6,965

Other ( 1,153 ) ( 25,297 )

Changes in operating assets and liabilities (1) :

5 unchanged sentences

Operating lease right-of-use assets 19,995 ( 258,426 )

Other assets 10,175 ( 5,804 )

Securities loaned ( 395,985 ) ( 369,351 )

14 unchanged sentences

Distribution from Virtu Financial to non-controlling interest ( 164,376 ) ( 52,087 )

Dividends ( 59,803 ) ( 54,904 )

Repurchase of Class C common stock — ( 96 )

Purchase of treasury stock ( 10,161 ) ( 10,898 )

5 unchanged sentences

Debt issuance costs ( 9,301 ) ( 35,702 )

Issuance of common stock in connection with secondary offering, net of offering costs — ( 375 )

Net cash provided by (used in) financing activities ( 483,897 ) 1,005,614

3 unchanged sentences

Cash, cash equivalents, and restricted or segregated cash, end of period $ 748,015 $ 497,561

Three Months Ended March 31,

Six Months Ended June 30,

(in thousands) 2020 2019

4 unchanged sentences

Share-based and accrued incentive compensation to developers relating to capitalized software 7,488 1,441

See Note 3 for a description of non-cash investing activities relating to the acquisition of KCG

Non-cash financing activities

Tax receivable agreement described in Note 5 — ( 644 )

(1) Net of ITG Acquisition for the three months ended March 31, 2019;

See accompanying notes to the Condensed Consolidated Financial Statements.

See accompanying notes to the Condensed Consolidated Financial Statements (Unaudited).

Virtu Financial, Inc.

6 unchanged sentences

VFI is a Delaware corporation whose primary asset is its ownership interest in Virtu Financial LLC (“Virtu Financial”).

As of March 31, 2020 , VFI owned approximately 63.2 % of the membership interests of Virtu Financial.

As of June 30, 2020, VFI owned approximately 64.1 % of the membership interests of Virtu Financial.

VFI is the sole managing member of Virtu Financial and operates and controls all of the businesses and affairs of Virtu Financial and its subsidiaries (the “Group”).

The Company is a leading financial firm that leverages cutting edge technology to deliver liquidity to the global markets and innovative, transparent trading solutions to its clients.

The Company provides deep liquidity in over 25,000 financial instruments, at over 235 venues, in 36 countries worldwide to help create more efficient markets.

Leveraging its global market structure expertise and scaled, multi-asset infrastructure, the Company provides its clients a robust product suite including offerings in execution, liquidity sourcing, analytics and broker-neutral, multi-dealer platforms in workflow technology.

The Company’s product offerings allow its clients to trade on hundreds of venues across over 50 countries and in multiple asset classes, including global equities, ETFs, foreign exchange, futures, fixed income and other commodities.

The Company provides deep liquidity in over 25,000 financial instruments, on over 235 venues, in 36 countries worldwide to help create more efficient markets.

Leveraging its global market structure expertise and scaled, multi-asset infrastructure, the Company provides its clients with a robust product suite including offerings in execution, liquidity sourcing, analytics and broker-neutral, multi-dealer platforms in workflow technology.

The Company’s product offerings allow its clients to trade on hundreds of venues in over 50 countries and across multiple asset classes, including global equities, ETFs, foreign exchange, futures, fixed income and other commodities.

The Company’s integrated, multi-asset analytics platform provides a range of pre and post-trade services, data products and compliance tools that its clients rely upon to invest, trade and manage risk across global markets.

12 unchanged sentences

The Company submitted applications to withdraw the SEC registrations for Virtu Financial BD LLC (“VFBD”) and Virtu Financial Capital Markets LLC (“VFCM”), which were approved in March 2020, having previously consolidated their broker-dealer activities within VAL as of December 31, 2019.

To further optimize its U.S.

operations, the Company consolidated VITG and VALT operations into VAL as of June 1, 2020 and submitted applications to withdraw SEC registrations for VITG and VALT broker dealers.

Other principal U.S.

20 unchanged sentences

Securities and Exchange Commission (“SEC”) regarding financial reporting with respect to Form 10-Q and accounting standards generally accepted in the United States of America (“U.S.

GAAP”) promulgated by the Financial Accounting Standards Board (“FASB”) in the Accounting Standards Codification (“ASC” or the “Codification”), and reflect all adjustments that, in the opinion of management, are normal and recurring, and that are necessary for a fair statement of the results for the periods presented.

Certain information and footnote disclosures normally included in financial statements

prepared in accordance with U.S.

of the results for the periods presented.

Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S.

GAAP have been condensed or omitted in accordance with SEC rules and regulations.

4 unchanged sentences

Such reclassifications are immaterial, individually and in the aggregate, to both current and all previously issued financial statements taken as a whole and have no effect on previously reported consolidated net income available to common stockholders.

Effective this quarter, the Company has changed the presentation of its Condensed Consolidated Statements of Comprehensive Income.

As a result, the Company made the following reclassifications to prior period amounts to be consistent with current period presentation.

For the three and six months ended June 30, 2019, respectively, the Company reclassified $ 23.6 million and $ 47.2 million of Payments for order flow to Brokerage, exchange, clearance fees and payments for order flow, net, previously reported as Brokerage, exchange and clearance fees, net.

Brokerage, exchange and clearance fees, net and Payments for order flow both represent costs associated with transacting trades.

For the three and six months ended June 30, 2019, respectively, the Company reclassified $ 3.4 million and $ 5.9 million of sublease income from Other, net to Operations and administrative to net with other occupancy costs within Operations and administrative.

The condensed consolidated financial statements include the accounts of the Company and its majority and wholly-owned subsidiaries.

5 unchanged sentences

The reported financial condition, results of operations and cash flows of the Company for the periods following the ITG Acquisition reflect ITG's and the Company's balances, and reflect the impact of purchase accounting adjustments.

The financial results for the three months ended March 31, 2019 comprise the Company's results for the entire applicable period and the results of ITG from the ITG Closing Date through March 31, 2019 .

The financial results for the six months ended June 30, 2019 comprise the Company's results for the entire applicable period and the results of ITG from the ITG Closing Date through June 30, 2019.

All periods prior to the ITG Closing Date comprise solely the Company's results.

8 unchanged sentences

Diluted EPS is calculated by dividing the net income available for common stockholders by the diluted weighted average shares outstanding for that period.

Diluted EPS includes the determinants of the basic EPS and, in addition, reflects the dilutive effect of shares of common stock estimated to be distributed in the future under the Company’s share based compensation plans.

The Company grants restricted stock units (“RSUs”), certain of which entitle recipients to receive nonforfeitable dividends during the vesting period on a basis equivalent to the dividends paid to holders of common stock.

As a result, the unvested RSUs meet the definition of a participating security requiring the application of the two-class method.

Diluted EPS includes the determinants of the basic EPS and, in addition, reflects the dilutive effect of shares of common stock estimated to be distributed in the future.

The Company grants restricted stock awards ("RSAs") and restricted stock units (“RSUs”), certain of which entitle recipients to receive nonforfeitable dividends during the vesting period on a basis equivalent to the dividends paid to holders of

common stock.

As a result, the unvested RSAs and participating unvested RSUs meet the definition of a participating security requiring the application of the two-class method.

Under the two-class method, earnings available to common shareholders, including both distributed and undistributed earnings, are allocated to each class of common stock and participating securities according to dividends declared and participating rights in undistributed earnings, which may cause diluted EPS to be more dilutive than the calculation using the treasury stock method.

3 unchanged sentences

The Company manages this risk by selecting financial institutions deemed highly creditworthy to minimize the risk.

Cash restricted or segregated under regulations and other represents (i) special reserve bank accounts for the exclusive benefit of customers (“Special Reserve Bank Account”) maintained by VAL and VITG in accordance with Rule 15c3-3 of the Securities Exchange Act of 1934, as amended (“Customer Protection Rule”), or proprietary accounts of broker-dealers, (ii) funds on deposit for Canadian and European trade clearing and settlement activity, (iii) segregated balances under a collateral account control agreement for the benefit of certain customers in Hong Kong, and (iv) funds relating to the securitization of bank guarantees supporting certain of the Company’s foreign leases.

Cash restricted or segregated under regulations and other represents (i) special reserve bank accounts for the exclusive benefit of customers (“Special Reserve Bank Account”) maintained by VAL in accordance with Rule 15c3-3 of the Securities Exchange Act of 1934, as amended (“Customer Protection Rule”), or proprietary accounts of broker-dealers, (ii) funds on deposit for Canadian and European trade clearing and settlement activity, (iii) segregated balances under a collateral account control agreement for the benefit of certain customers in Hong Kong, and (iv) funds relating to the securitization of bank guarantees supporting certain of the Company’s foreign leases.

Securities Borrowed and Securities Loaned

23 unchanged sentences

In the normal course of business, a significant portion of the Company’s securities transactions, money balances, and security positions are transacted with several third-party brokers.

The Company is subject to credit risk to the extent any broker

with whom it conducts business is unable to fulfill contractual obligations on its behalf.

The Company monitors the financial condition of such brokers and to minimize the risk of any losses from these counterparties.

The Company is subject to credit risk to the extent any broker with whom it conducts business is unable to fulfill contractual obligations on its behalf.

The Company monitors the financial condition of such brokers to minimize the risk of any losses from these counterparties.

Financial Instruments Owned Including Those Pledged as Collateral and Financial Instruments Sold, Not Yet Purchased

59 unchanged sentences

The Company determines if an arrangement is a lease at the inception of the arrangement.

Operating leases are included in Operating lease right-of use assets and Operating lease liabilities on the Condensed Consolidated Statements of Financial Condition.

Operating lease right-of-use (“ROU”) assets are assets that represent the lessee’s right to use, or control the use of, a specified asset for the lease term.

Operating leases are included in Operating lease right-of use ("ROU") assets and Operating lease liabilities on the Condensed Consolidated Statements of Financial Condition.

Operating lease ROU assets are assets that represent the lessee’s right to use, or control the use of, a specified asset for the lease term.

Finance leases consist primarily of leases for technology and equipment and are included in Property, equipment, and capitalized software and Accounts payable, accrued expenses and other liabilities on the Condensed Consolidated Statements of Financial Condition.

ROU assets and lease liabilities are recognized based on the present value of the future minimum lease payments over the lease term at the commencement date.

The Company uses its incremental borrowing rate based on the information available at the commencement date in determining the present value of future payments.

The Company uses its incremental borrowing rate, based on the information available at the commencement date of the lease, in determining the present value of future payments.

The ROU assets are reduced by lease incentives and initial direct costs incurred.

3 unchanged sentences

for such leases, the Company accounts for the lease and non-lease components as a single lease component.

The Company nets its sublease income against corresponding lease expenses within Operations and Administrative expenses on the Condensed Consolidated Statement of Comprehensive Income.

Goodwill represents the excess of the purchase price over the underlying net tangible and intangible assets of the Company’s acquisitions.

17 unchanged sentences

Under a commission management program, the Company allows institutional clients to allocate a portion of their gross commissions to pay for research and other services provided by third parties.

The Company recognizes the related revenue when the third party research services are rendered and payments are made.

As the Company acts as an agent in these transactions, it records such expenses on a net basis within Commissions, net and technology services in the Condensed Consolidated Statements of Comprehensive Income.

Technology services revenues consist of technology licensing fees and client commission fees.

Technology licensing fees are earned from third parties for licensing of the Company’s proprietary risk management and trading infrastructure technology and the provision of associated management and hosting services.

These fees include both upfront and annual recurring fees, as well as, in certain cases, contingent fees based on client revenues, which represent variable consideration.

The services offered under these contracts have the same pattern of transfer;

accordingly, they are being measured and recognized as a single performance obligation.

The performance obligation is satisfied over time, and accordingly, revenue is recognized as time passes.

Variable consideration has not been included in the transaction price as the amount of consideration is contingent on factors outside the Company’s control and thus it is not probable that a significant reversal of cumulative revenue recognized will not occur.

Recurring fees, which exclude variable consideration, are billed and collected on a quarterly basis.

The Company recognizes the related revenue when the third-party research services are rendered and payments are made to the service provider.

The Company provides order management software (“OMS”) and related software products and connectivity services to customers and recognizes license fee revenues and monthly connectivity fees.

8 unchanged sentences

Dividends on financial instruments owned including those pledged as collateral and financial instruments sold, not yet purchased are recorded on the ex-dividend date and interest is recognized on an accrual basis.

Brokerage, Exchange and Clearance Fees, Net

Brokerage, exchange and clearance fees, net, comprise the costs of executing and clearing trades and are recorded on a trade date basis.

Rebates consist of volume discounts, credits or payments received from exchanges or other market places related to the placement and/or removal of liquidity from the order flow in the marketplace.

Rebates are recorded on an accrual basis and included net within brokerage, exchange and clearance fees in the accompanying Condensed Consolidated Statements of Comprehensive Income.

Payments for Order Flow

Brokerage, Exchange, Clearance Fees and Payments for Order Flow, Net

Brokerage, exchange, clearance fees and payments for order flow, net, comprise the costs of executing and clearing trades and are accrued on a trade date basis in the Condensed Consolidated Statements of Comprehensive Income.

These costs are net of rebates, which consist of volume discounts, credits or payments received from exchanges or other market places related to the placement and/or removal of liquidity from the order flow in the marketplace.

Rebates are recorded on an accrual basis.

Payments for order flow represent payments to broker-dealer clients, in the normal course of business, for directing their order flow in U.S.

equities to the Company.

Payments for order flow are recorded on a trade-date basis in the Condensed Consolidated Statements of Comprehensive Income.

The Company is subject to U.S.

6 unchanged sentences

The tax benefits recognized in the condensed consolidated financial statements from such a position are measured based on the largest benefit for each such position that has a greater than fifty percent likelihood of being realized upon ultimate resolution.

Many factors are considered when evaluating and estimating the

tax positions and tax benefits.

Many factors are considered when evaluating and estimating the tax positions and tax benefits.

Such estimates involve interpretations of regulations, rulings, case law, etc.

and are inherently complex.

and are inherently

The Company’s estimates may require periodic adjustments and may not accurately anticipate actual outcomes as resolution of income tax treatments in individual jurisdictions typically would not be known for several years after completion of any fiscal year.

15 unchanged sentences

2015 Management Incentive Plan (as amended, the “Amended and Restated 2015 Management Incentive Plan”) and pursuant to the Amended and Restated Investment Technology Group, Inc.

2007 Omnibus Equity Compensation Plan, dated as of June 8, 2017 (the “Amended and Restated ITG 2007 Equity Plan”), are in the form of stock options, Class A common stock, par value $ 0.00001 per share (the “Class A Common Stock”) and RSUs, as applicable.

The fair value of the stock option grants is determined through the application of the Black-Scholes-Merton model.

The fair value of the Class A Common Stock and RSUs are determined based on the volume weighted average price for the three days preceding the grant, and with respect to the RSUs, a projected annual forfeiture rate.

The fair value of share-based awards granted to employees is expensed based on the vesting conditions and are recognized on a straight-line basis over the vesting period.

The fair values of the Class A Common Stock and RSUs are determined based on the volume weighted average price for the three days preceding the grant.

With respect to the RSUs, forfeitures are accounted for as they occur.

The fair value of RSAs is determined based on the closing price as of the grant date.

The fair value of share-based awards granted to employees is expensed based on the vesting conditions and is recognized on a straight-line basis over the vesting period, or, in the case of RSAs subject to performance conditions, from the date that achievement of the performance target becomes probable through the remainder of the vesting period.

The Company records as treasury stock shares repurchased from its employees for the purpose of settling tax liabilities incurred upon the issuance of Class A Common Stock, the vesting of RSUs or the exercise of stock options.

5 unchanged sentences

The Company and its JV partners each pay monthly fees for the use of the microwave communication networks in connection with their respective trading activities, and the JVs may sell excess bandwidth that is not utilized by the JV members to third parties.

As of March 31, 2020 , the Company held minority stakes of 10 % and 50 % , respectively, in these JVs.

As of June 30, 2020, the Company held noncontrolling interests of 10 % and 50 %, respectively, in these JVs.

The Company has an interest in a JV that offers derivatives trading technology and execution services to broker-dealers, professional traders and select hedge funds.

As of March 31, 2020 , the Company held approximately a 10 % minority stake in this JV.

As of June 30, 2020, the Company held approximately a 10 % noncontrolling interest in this JV.

The Company has an interest in a JV that is developing a member-owned equities exchange with the goal of increasing competition and transparency, while reducing fixed costs and simplifying execution of equity trading in the US.

As of March 31, 2020 , the Company held approximately a 15.8 % minority stake in this JV.

As of June 30, 2020, the Company held approximately a 14.6 % noncontrolling interest in this JV.

The Company's four JVs meet the criteria to be considered VIEs.

4 unchanged sentences

The Company’s exposure to the obligations of these VIEs is generally limited to its interests in each respective JV, which is the carrying value of the equity investment in each JV.

The following table presents the Company’s nonconsolidated VIEs at March 31, 2020 :

Carrying Amount

Maximum Exposure to Loss

(in thousands)

The following table presents the Company’s nonconsolidated VIEs at June 30, 2020:

Carrying Amount Maximum Exposure to Loss VIEs' assets

(in thousands) Asset Liability

Equity investment $ 32,316 $ — $ 32,316 $ 186,013

The following table presents the Company’s nonconsolidated VIEs at December 31, 2019:

Carrying Amount

Maximum Exposure to Loss

(in thousands)

Carrying Amount Maximum Exposure to Loss VIEs' assets

(in thousands) Asset Liability

Equity investment $ 28,579 $ — $ 28,579 $ 119,051

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This ASU amends several aspects of the measurement of credit losses on financial instruments, including replacing the existing incurred credit loss model and other models with the Current Expected Credit Losses model (“CECL”).

Under CECL, the allowance for losses for

financial assets that are measured at amortized cost reflects management’s estimate of credit losses over the remaining expected life of the financial assets.

Expected credit losses for newly recognized financial assets, as well as changes to expected credit losses during the period, would be recognized in earnings, and adoption of the ASU will generally result in earlier recognition of credit losses.

Under CECL, the allowance for losses for financial assets that are measured at amortized cost reflects management’s estimate of credit losses over the remaining expected life of the financial assets.

Expected credit losses for newly recognized financial assets, as well as changes to expected credit

losses during the period, would be recognized in earnings, and adoption of the ASU will generally result in earlier recognition of credit losses.

Expected credit losses will be measured based on historical experience, current conditions and forecasts that affect the collectability of the reported amount, and credit losses will be generally recognized earlier than under current U.S.

2 unchanged sentences

The adoption of this ASU did not have a material impact to the Company's financial condition, results of operations or cash flows.

Accounting Pronouncements, Not Yet Adopted as of March 31, 2020

Accounting Pronouncements, Not Yet Adopted as of June 30, 2020

Income Taxes - In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740):

24 unchanged sentences

The reported financial condition and results of operations of the Company for the periods following the ITG Closing Date reflect ITG's and the Company's balances and reflect the impact of purchase accounting adjustments.

As the Company is the accounting acquirer, the financial results for the three months ended March 31, 2019 comprise the results of the Company for the entire applicable period and the results of ITG from the ITG Closing Date through March 31, 2019 .

As the Company is the accounting acquirer, the financial results for the six months ended June 30, 2019 comprise the results of the Company for the entire applicable period and the results of ITG from the ITG Closing Date through June 30, 2019.

All periods prior to the ITG Closing Date comprise solely the results of the Company.

Certain former ITG management employees were terminated upon the ITG Acquisition, and as a result were paid an aggregate of $ 17.6 million pursuant to their existing employment contracts and arrangements.

This amount has been recognized as an expense by the Company and is included in Employee compensation and payroll taxes in the Condensed Consolidated Statements of Comprehensive Income for the three months ended March 31, 2019 .

Purchase price and goodwill

3 unchanged sentences

Amounts allocated to intangible assets, the amortization period and goodwill were as follows:

(in thousands)

(in thousands) Amount Amortization

Technology $ 76,000 5

Customer relationships 437,600 10

Trade names 3,600 3

Intangible assets 517,200

Goodwill 312,343

Total $ 829,543

The Company estimated the fair value of the intangible assets, which involved the use of significant estimates and assumptions with respect to the timing and amounts of revenue growth rates, customer attrition rates, future tax rates, royalty rates, contributory asset charges, discount rate and the resulting cash flows.

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The Assumed Awards are subject to the same terms and conditions that were applicable to them under the Amended and Restated ITG 2007 Equity Plan, except that (i) the Assumed Awards relate to shares of the Company’s Class A Common Stock, (ii) the number of shares of Class A Common Stock subject to the Assumed Awards was the result of an adjustment based upon an Exchange Ratio (as defined in the Agreement and Plan of Merger by and between the Company, Impala Merger Sub, Inc., a Delaware corporation and an indirect wholly owned subsidiary of the Company, and ITG, dated as of November 6, 2018, the “ITG Merger Agreement”) and (iii) the performance share unit awards were converted into service-based vesting restricted stock unit awards that were no longer subject to any performance-based vesting conditions.

As of the ITG Closing Date, the aggregate number of shares of Class A Common Stock subject to such Assumed Awards was 2,497,028 and the aggregate number of shares of Class A Common Stock

that remained issuable pursuant to the Amended and Restated ITG 2007 Equity Plan was 1,230,406 .

As of the ITG Closing Date, the aggregate number of shares of Class A Common Stock subject to such Assumed Awards was 2,497,028 and the aggregate number of shares of Class A Common Stock that remained issuable pursuant to the Amended and Restated ITG 2007 Equity Plan was 1,230,406 .

The Company filed with the SEC a Registration Statement on Form S-8 on the ITG Closing Date to register such shares of Class A Common Stock.

Tax treatment of the ITG Acquisition

The ITG Acquisition will be treated as a tax-free transaction as described in Section 351 of the Internal Revenue Code.

The ITG Acquisition is being treated as a tax-free transaction as described in Section 351 of the Internal Revenue Code.

ITG’s tax basis in its assets and liabilities therefore generally carried over to the Company following the ITG Acquisition.

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The below table contains a reconciliation of net income (loss) before noncontrolling interest to net income (loss) available for common stockholders:

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

(in thousands) 2020 2019 2020 2019

5 unchanged sentences

The calculation of basic and diluted earnings per share is presented below:

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

(in thousands, except for share or per share data) 2020 2019 2020 2019

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Weighted average shares of common stock outstanding:

Class A 121,527,673 112,828,240 120,642,415 110,076,375

Basic earnings (loss) per share $ 1.59 $ ( 0.27 ) $ 3.39 $ ( 0.34 )

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

(in thousands, except for share or per share data) 2020 2019 2020 2019

3 unchanged sentences

Issued and outstanding 121,527,673 112,828,240 120,642,415 110,076,375

Issuable pursuant to Amended and Restated 2015 Management Incentive Plan (1)

Issuable pursuant to Amended and Restated 2015 Management Incentive Plan and Warrants issued in connection with the Founder Member Loan (1) 711,232 — 371,274 —

122,238,905 112,828,240 121,013,689 110,076,375

Diluted earnings (loss) per share $ 1.58 $ ( 0.27 ) $ 3.38 $ ( 0.34 )

The dilutive impact excludes from the computation of earnings (loss) per share 76,817 unexercised stock options issuable pursuant to the Amended and Restated Investment Technology Group, Inc.

2007 Omnibus Equity Compensation Plan, and 3,000,000 unexercised warrants for the three months ended March 31, 2020, and 864,601 options and 168,221 restricted stock units for the three months ended March 31, 2019, because the inclusion of these instruments would have been anti-dilutive.

(1) The dilutive impact excludes from the computation of earnings (loss) per share for the three and six months ended June 30, 2019, respectively, 669,064 and 746,392 unexercised stock options and 299,288 and 262,785 restricted stock units issuable pursuant to the Amended and Restated Investment Technology Group, Inc.

2007 Omnibus Equity Compensation Plan because the inclusion of these instruments would have been anti-dilutive.

Tax Receivable Agreements

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An Exchange during the year will give rise to favorable tax attributes that may generate cash tax savings specific to the Exchange to be realized over a specific period of time (generally 15 years).

At each Exchange, management estimates the Company’s cumulative TRA obligations to be reported on the Condensed Consolidated Statement of Financial Condition, which amounted to $ 256.0 million and $ 269.3 million as of March 31, 2020 and December 31, 2019 , respectively.

The tax attributes are computed as the difference between the Company's basis in the partnership interest (“outside basis”) as compared to the Company’s share of the adjusted tax basis of partnership property (“inside basis”) at the time of each Exchange.

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As a result of (i) the purchase of equity interests in Virtu Financial from certain Virtu Members in connection with the Reorganization Transactions, (ii) the purchase of non-voting common interest units in Virtu Financial (the “Virtu Financial Units”) (along with the corresponding shares of Class C common stock, par value $ 0.00001 per share (the “Class C Common Stock”)) from certain of the Virtu Members in connection with the IPO, (iii) the purchase of Virtu Financial Units (along with the corresponding shares of Class C Common Stock) and the exchange of Virtu Financial Units (along with the corresponding shares of Class C Common Stock) for shares of Class A Common Stock in connection with the secondary offerings completed in November 2015 (the “November 2015 Secondary Offering”) and September 2016 (the “September 2016 Secondary Offering”), and (iv) the purchase of Virtu Financial Units (along with corresponding shares of the Company’s Class D common stock, par value $ 0.00001 per share (the “Class D Common Stock”) in connection with the May 2018 Secondary Offering (defined below) and the May 2019 Secondary Offering (defined below, and, together with the November 2015 Secondary Offering, the September 2016 Secondary Offering, and the May 2018 Secondary Offering, the “Secondary Offerings”), payments to certain Virtu Members in respect of the purchases are expected to range from approximately $ 3.3 million to $ 20.7 million per year over the next 15 years.

additional deferred tax asset of $ 78.7 million and a payment liability pursuant to the tax receivable agreements of $ 79.7 million , with the $ 1.0 million difference recorded as a decrease to additional paid-in capital.

In connection with the employee exchanges and May 2018 Secondary Offering between the Company and TJMT Holdings LLC and the other selling stockholders, both as described in Note 17 “Capital Structure”, the Company recorded an additional deferred tax asset of $ 78.7 million and a payment liability pursuant to the tax receivable agreements of $ 79.7 million, with the $ 1.0 million difference recorded as a decrease to additional paid-in capital.

In connection with the employee exchanges and May 2019 Secondary Offering between the Company and TJMT Holdings LLC and the other selling stockholders, both as described in Note 17 “Capital Structure”, the Company recorded an additional deferred tax asset of $ 49.1 million and payment liability pursuant to the tax receivable agreements of $ 54.9 million, with the $ 5.8 million difference recorded as a decrease to additional paid-in capital.

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corporate income tax rate as further described in Note 13 “Income Taxes”, the aforementioned deferred tax asset and related payment liability were subsequently reduced, and the Company recorded a reduction of its tax receivable agreement obligation of $ 86.6 million due to the change in the corporate income tax rate.

At March 31, 2020 and December 31, 2019 , the Company’s remaining deferred tax assets that relate to the matters described above were approximately $ 193.1 million and $ 197.6 million , respectively, and the Company’s liabilities over the next 15 years pursuant to the tax receivable agreements were approximately $ 256.0 million and $ 269.3 million , respectively.

The amounts recorded as of March 31, 2020 are based on best estimates available at the respective dates and may be subject to change after the filing of the Company’s U.S.

At June 30, 2020 and December 31, 2019, the Company’s remaining deferred tax assets that relate to the matters described above were approximately $ 188.7 million and $ 197.6 million, respectively, and the Company’s liabilities over the next 15 years pursuant to the tax receivable agreements were approximately $ 256.0 million and $ 269.3 million, respectively.

The amounts recorded as of June 30, 2020 are based on best estimates available at the respective dates and may be subject to change after the filing of the Company’s U.S.

federal and state income tax returns for the years in which tax savings were realized.

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and one non-operating segment:

As of March 31, 2020 and December 31, 2019 , the Company’s total amount of goodwill recorded was $ 1,148.9 million .

No goodwill impairment was recognized during the three months ended March 31, 2020 or 2019 .

The following table presents the details of goodwill by segment as of March 31, 2020 and December 31, 2019 :

(in thousands)

Market Making

Execution Services

As of June 30, 2020 and December 31, 2019, the Company’s total amount of goodwill recorded was $ 1,148.9 million.

No goodwill impairment was recognized during the three and six months ended June 30, 2020 or 2019.

The following table presents the details of goodwill by segment as of June 30, 2020 and December 31, 2019:

(in thousands) Market Making Execution Services Corporate Total

Balance as of period-end $ 755,292 $ 393,634 $ — $ 1,148,926

As of March 31, 2020 and December 31, 2019 , the Company's total amount of intangible assets recorded was $ 510.7 million and $ 529.6 million , respectively.

Acquired intangible assets consisted of the following as of March 31, 2020 and December 31, 2019 :

As of March 31, 2020

(in thousands)

Gross Carrying Amount

Accumulated Amortization

Net Carrying Amount

Purchased technology

As of June 30, 2020 and December 31, 2019, the Company's total amount of intangible assets recorded was $ 491.7 million and $ 529.6 million, respectively.

Acquired intangible assets consisted of the following as of June 30, 2020 and December 31, 2019:

As of June 30, 2020

(in thousands) Gross Carrying Amount Accumulated Amortization Net Carrying Amount Useful Lives

Purchased technology $ 110,000 $ ( 110,000 ) $ — 1.4 to 2.5

ETF issuer relationships 950 ( 823 ) 127 9

ETF buyer relationships 950 ( 823 ) 127 9

Customer relationships

Favorable occupancy leases

Exchange memberships

Technology 136,000 ( 71,084 ) 64,916 1 to 6

Customer relationships 486,600 ( 70,377 ) 416,223 10 to 12

Trade name 3,600 ( 1,600 ) 2,000 3

Favorable occupancy leases 5,895 ( 2,444 ) 3,451 3 to 15

Exchange memberships 4,882 — 4,882 Indefinite

$ 748,877 $ ( 257,151 ) $ 491,726

As of December 31, 2019

(in thousands)

Gross Carrying Amount

Accumulated Amortization

Net Carrying Amount

Purchased technology

(in thousands) Gross Carrying Amount Accumulated Amortization Net Carrying Amount Useful Lives

Purchased technology $ 110,000 $ ( 110,000 ) $ — 1.4 to 2.5

ETF issuer relationships 950 ( 770 ) 180 9

ETF buyer relationships 950 ( 770 ) 180 9

Customer relationships

Favorable occupancy leases

Exchange memberships

Amortization expense relating to finite-lived intangible assets was approximately $ 19.0 million and $ 10.9 million for the three months ended March 31, 2020 and 2019 , respectively.

Technology 136,000 ( 58,203 ) 77,797 1 to 6

Customer relationships 486,600 ( 46,456 ) 440,144 10 to 12

Trade name 3,600 ( 1,000 ) 2,600 3

Favorable occupancy leases 5,895 ( 2,040 ) 3,855 3 to 15

Exchange memberships 4,882 — 4,882 Indefinite

$ 748,877 $ ( 219,239 ) $ 529,638

Amortization expense relating to finite-lived intangible assets was approximately $ 19.0 million and $ 20.6 million for the three months ended June 30, 2020 and 2019, respectively, and $ 37.9 million and $ 31.5 million for the six months ended

June 30, 2020 and 2019, respectively.

This is included in Amortization of purchased intangibles and acquired capitalized software in the accompanying Condensed Consolidated Statements of Comprehensive Income.

The Company expects to record amortization expense as follows over the remaining current year and five subsequent years:

(in thousands) June 30, 2020

Remainder of 2020 $ 36,341

Receivables from/Payables to Broker-Dealers and Clearing Organizations

The following is a summary of receivables from and payables to brokers-dealers and clearing organizations at March 31, 2020 and December 31, 2019 :

(in thousands)

March 31, 2020

December 31, 2019

The following is a summary of receivables from and payables to brokers-dealers and clearing organizations at June 30, 2020 and December 31, 2019:

(in thousands) June 30, 2020 December 31, 2019

Due from prime brokers $ 834,473 $ 418,059

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Total payables to broker-dealers and clearing organizations $ 1,200,212 $ 826,750

Included as a deduction from “Due from prime brokers” and “Net equity with futures commission merchants” is the outstanding principal balance on all of the Company’s prime brokerage credit facilities (described in Note 9 “Borrowings” ) of approximately $ 283.0 million and $ 134.3 million as of March 31, 2020 and December 31, 2019 , respectively.

Included as a deduction from “Due from prime brokers” and “Net equity with futures commission merchants” is the outstanding principal balance on all of the Company’s prime brokerage credit facilities (described in Note 9 “Borrowings”) of approximately $ 112.4 million and $ 134.3 million as of June 30, 2020 and December 31, 2019, respectively.

The loan proceeds from the credit facilities are available only to meet the initial margin requirements associated with the Company’s ordinary course futures and other trading positions, which are held in the Company’s trading accounts with an affiliate of the respective financial institutions.

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The Company is permitted to sell or repledge securities received as collateral and use these securities to secure repurchase agreements, enter into securities lending transactions or deliver these securities to counterparties or clearing organizations to cover short positions.

At March 31, 2020 and December 31, 2019 , substantially all of the securities received as collateral have been repledged.

The fair value of the collateralized transactions at March 31, 2020 and December 31, 2019 are summarized as follows:

(in thousands)

March 31, 2020

December 31, 2019

At June 30, 2020 and December 31, 2019, substantially all of the securities received as collateral have been repledged.

The fair value of the collateralized transactions at June 30, 2020 and December 31, 2019 are summarized as follows:

(in thousands) June 30, 2020 December 31, 2019

Securities received as collateral:

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Securities purchased under agreements to resell 244,242 142,922

$ 1,646,951 $ 2,023,927

In the normal course of business, the Company pledges qualified securities with clearing organizations to satisfy daily margin and clearing fund requirements.

Financial instruments owned and pledged, where the counterparty has the right to repledge, at March 31, 2020 and December 31, 2019 consisted of the following:

(in thousands)

March 31, 2020

December 31, 2019

Financial instruments owned and pledged, where the counterparty has the right to repledge, at June 30, 2020 and December 31, 2019 consisted of the following:

(in thousands) June 30, 2020 December 31, 2019

Equities $ 575,235 $ 654,366

Exchange traded notes 27,736 42,590

$ 602,971 $ 696,956

Short-term Borrowings, net

The following summarizes the Company's short-term borrowing balances outstanding, net of related debt issuance costs, with each described in further detail below.

March 31, 2020

(in thousands)

Borrowing Outstanding

Deferred Debt Issuance Cost

Short-term Borrowings, net

Broker-dealer credit facilities

June 30, 2020

(in thousands) Borrowing Outstanding Deferred Debt Issuance Cost Short-term Borrowings, net

Short-term bank loans $ 26,274 $ — $ 26,274

First Lien Revolving Facility

December 31, 2019

(in thousands)

Borrowing Outstanding

Deferred Debt Issuance Cost

Short-term Borrowings, net

(in thousands) Borrowing Outstanding Deferred Debt Issuance Cost Short-term Borrowings, net

Broker-dealer credit facilities $ 30,000 $ ( 2,100 ) $ 27,900

Short-term bank loans 45,586 — 45,586

$ 75,586 $ ( 2,100 ) $ 73,486

Broker-Dealer Credit Facilities

The Company is a party to two secured credit facilities with a financial institution to finance overnight securities positions purchased as part of its ordinary course broker-dealer market making activities.

One of the facilities (the “Uncommitted Facility”) is provided on an uncommitted basis with an aggregate borrowing limit of $ 200 million , which was subsequently increased to $ 300 million in January 2020, and is collateralized by the trading and deposit account of one of the Company’s broker-dealer subsidiaries maintained at the financial institution.

On November 3, 2017, the Company entered into the second credit facility (the “Committed Facility”) with the same financial institution for an aggregate borrowing limit of $ 500 million .

The Committed Facility was subsequently amended and restated March 1, 2019 to increase the borrowing limit to $ 600 million and to enable a broker-dealer subsidiary of ITG as a borrower thereunder, amended again on September 23, 2019 to adjust certain sublimits and required minimum total regulatory capital, and amended further on March 12, 2020 to adjust certain sublimits.

One of the facilities (the “Uncommitted Facility”) is provided on an uncommitted basis with an aggregate borrowing limit of $ 300 million, which was subsequently increased to $ 400 million in April 2020, and is collateralized by the trading and deposit account of one of the Company’s broker-dealer subsidiaries maintained at the financial institution.

On November 3, 2017, the Company entered into the second credit facility (the “Committed Facility”) with the same financial institution which was subsequently amended and restated March 1, 2019 to increase the borrowing limit to $ 600 million and subsequently amended to adjust sublimits and certain other terms, including most recently on July 29, 2020.

The Committed Facility consists of two borrowing bases:

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Borrowing Base B Loan is to be used to fund margin deposit with the National Securities Clearing Corporation.

Each of the broker-dealers has a sublimit under Borrowing Base A Loan, from $ 300 million to $ 600 million , which bears interest at the adjusted LIBOR or base rate plus 1.25 % per annum.

Each of the broker-dealers has a sublimit under Borrowing Base B Loan, from $ 100 million to $ 150 million , or up to $ 300 million prior to a specified trigger date not later than July 1, 2020, which bears interest at the adjusted LIBOR or base rate plus 2.50 % per annum.

Borrowing Base A Loans are available up to $ 600 million and bears interest at the adjusted LIBOR or base rate plus 1.25 % per annum.

Following the July 29, 2020 amendment, Borrowing Base B Loans are subject to a sublimit of $ 200 million and bear interest at the adjusted LIBOR or base rate plus 2.50 % per annum.

A commitment fee of 0.50 % per annum on the average daily unused portion of this facility is payable quarterly in arrears.

On March 10, 2020, a broker-dealer subsidiary of the Company entered into a short term loan arrangement with Jefferies Financial Group, Inc., as lender, for a $ 20 million demand loan (the "Demand Loan") repayable no later than ninety ( 90 ) days after the date of borrowing.

The Demand Loan bears interest at a rate of 10 % per annum, increased by 2.0 % with respect to any principal amounts not paid when due and owing.

If an event of default occurs and is continuing, the lender may declare all loans immediately due and payable.

The Demand Loan bore interest at a rate of 10 % per annum, increased by 2.0 % with respect to any principal amounts not paid when due and payable.

The Demand Loan was repaid in full as of April 17, 2020.

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The Founder Member Loans may be borrowed in one or more borrowings on or after March 20, 2020 and prior to September 20, 2020, as further described below.

VAL intends use the proceeds of the Founder Member Loans solely to finance the purchase and settlement of securities and to fund margin deposits with the National Securities Clearing Corporation and Options Clearing Corporation.

VAL intends to use the proceeds of the Founder Member Loans solely to finance the purchase and settlement of securities and to fund margin deposits with the National Securities Clearing Corporation and Options Clearing Corporation.

The Founder Member is an affiliate of Mr.

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VAL may prepay the Founder Member Loans in whole or in part at any time without penalty.

There was no outstanding balance on this loan as of June 30, 2020.

The foregoing description of the Founder Member Loan Facility does not purport to be complete and is qualified in its entirety by reference to the complete text of the Founder Member Loan Facility, which is filed as an exhibit to the Company's 2020 quarterly report on Form 10-Q for the period ended March 31, 2020 filed with Securities and Exchange Commission on May 11, 2020.

The following summarizes the Company’s broker-dealer credit facilities' carrying values, net of unamortized debt issuance costs, where applicable.

These balances are included within Short-term borrowings on the Condensed Consolidated Statement of Financial Condition.

At March 31, 2020

(in thousands)

Interest Rate

Financing Available

Borrowing Outstanding

Deferred Debt Issuance Cost

Outstanding Borrowings, net

At June 30, 2020

(in thousands) Interest Rate Financing Available Borrowing Outstanding Deferred Debt Issuance Cost Outstanding Borrowings, net

Broker-dealer credit facilities:

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Founder Member Loan Facility (3) 8.00 % 300,000 — — —

(1) $13.1 million of deferred debt issuance costs associated with warrants issued and legal fees incurred for the Founder Member Loan Facility are included within Other assets on the Condensed Consolidated Statement of Financial Condition

$ 1,300,000 $ — $ — $ —

(1) $ 0.5 million of deferred debt issuance costs are included within Other assets on the Condensed Consolidated Statement of Financial Condition

(2) $ 0.9 million of deferred debt issuance costs are included within Other assets on the Condensed Consolidated Statement of Financial Condition

(3) $ 6.2 million of deferred debt issuance costs are included within Other assets on the Condensed Consolidated Statement of Financial Condition

At December 31, 2019

(in thousands)

Interest Rate

Financing Available

Borrowing Outstanding

Deferred Debt Issuance Cost

Outstanding Borrowings, net

(in thousands) Interest Rate Financing Available Borrowing Outstanding Deferred Debt Issuance Cost Outstanding Borrowings, net

Broker-dealer credit facilities:

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Committed facility 3.01 % 600,000 — — —

$ 800,000 $ 30,000 $ ( 2,100 ) $ 27,900

The following summarizes interest expense for the broker-dealer facilities.

Interest expense is included within Interest and dividends expense in the accompanying Condensed Consolidated Statements of Comprehensive Income.

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

(in thousands) 2020 2019 2020 2019

2 unchanged sentences

Committed facility 202 181 362 254

Demand Loan 94 — 211 —

Founder Member Loan Facility $ — $ — $ — $ —

$ 427 $ 358 $ 1,336 $ 615

Short-Term Bank Loans

The Company’s international securities clearance and settlement activities are funded with operating cash or with short-term bank loans in the form of overdraft facilities.

At March 31, 2020 , there was $ 180.5 million associated with international settlement activities outstanding under these facilities at a weighted average interest rate of approximately 2.1 % .

At June 30, 2020, there was $ 26.3 million associated with international settlement activities outstanding under these facilities at a weighted average interest rate of approximately 3.1 %.

At December 31, 2019, there was $ 45.6 million associated with international settlement activities outstanding under these facilities at a weighted average interest rate of approximately 4.5 %.

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The Company's Amended Credit Agreement (as defined below) provides for a $ 50.0 million senior secured first lien revolving facility.

At March 31, 2020 , there was $ 15.0 million of principal outstanding on this facility with an interest rate of 5.8 % .

Interest expense in relation to the facility was $ 0.3 million for the three months ended March 31, 2020 .

There were no outstanding borrowings under the facility as of December 31, 2019.

There were no outstanding borrowings under the facility as of June 30, 2020 or December 31, 2019.

Interest expense in relation to the facility was $ 0.1 million for the three months ended June 30, 2020 and $ 0.4 million for the six months ended June 30, 2020.

Prime Brokerage Credit Facilities

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The proceeds of these facilities are used to meet margin requirements associated with the products traded by the Company in the ordinary course, and amounts borrowed are collateralized by the Company’s trading accounts with the applicable financial institution.

At March 31, 2020

Weighted Average

Interest Rate

At June 30, 2020

(in thousands) Weighted Average

Interest Rate Financing

Available Borrowing

Prime Brokerage Credit Facilities:

Prime brokerage credit facilities (1) 2.78 % $ 616,000 $ 112,412

$ 616,000 $ 112,412

At December 31, 2019

Weighted Average

Interest Rate

(in thousands) Weighted Average

Interest Rate Financing

Available Borrowing

Prime Brokerage Credit Facilities:

Prime brokerage credit facilities (1) 4.22 % $ 586,000 $ 134,331

$ 586,000 $ 134,331

(1) Outstanding borrowings are included with Receivables from/ Payables to broker-dealers and clearing organizations within the Condensed Consolidated Statements of Financial Condition.

Interest expense in relation to the facilities was approximately $ 1.3 million and $ 1.9 million for the three months ended March 31, 2020 and 2019 , respectively.

Interest expense in relation to the facilities was approximately $ 1.3 million and $ 1.8 million for the three months ended June 30, 2020 and 2019, respectively, and $ 2.6 million and $ 3.7 million for the six months ended June 30, 2020 and 2019, respectively.

Long-Term Borrowings

The following summarizes the Company’s long-term borrowings, net of unamortized discount and debt issuance costs, where applicable:

At March 31, 2020

(in thousands)

Outstanding Principal

Deferred Debt Issuance Cost

Outstanding Borrowings, net

At June 30, 2020

(in thousands) Maturity

Date Interest

Rate Outstanding Principal Discount Deferred Debt Issuance Cost Outstanding Borrowings, net

Long-term borrowings:

First Lien Term Loan Facility

First Lien Term Loan Facility March 2026 3.19 % $ 1,736,512 $ ( 5,501 ) $ ( 30,660 ) $ 1,700,351

SBI bonds January 2023 5.00 % 32,428 — ( 263 ) 32,165

$ 1,768,940 $ ( 5,501 ) $ ( 30,923 ) $ 1,732,516

At December 31, 2019

(in thousands)

Outstanding Principal

Deferred Debt Issuance Cost

Outstanding Borrowings, net

(in thousands) Maturity

Date Interest

Rate Outstanding Principal Discount Deferred Debt Issuance Cost Outstanding Borrowings, net

Long-term borrowings:

First Lien Term Loan Facility

First Lien Term Loan Facility March 2026 5.20 % $ 1,925,000 $ ( 6,795 ) $ ( 32,513 ) $ 1,885,692

SBI bonds January 2023 5.00 % 32,225 — ( 51 ) 32,174

$ 1,957,225 $ ( 6,795 ) $ ( 32,564 ) $ 1,917,866

Credit Agreement

8 unchanged sentences

On the Amendment No.

1 Closing Date, VFH borrowed the Incremental Term Loans and used the proceeds together with available cash to redeem all of the $ 500.0 million aggregate principal amount of the outstanding 6.750 % Senior Secured Second Lien Notes (as defined below) due 2022 issued by VFH and Orchestra Co Issuer, Inc., a Delaware corporation and indirect subsidiary of the Company (together with VFH, the “Issuers”), and pay related fees and expenses.

terms, conditions and covenants applicable to the Incremental Term Loans are the same as the terms, conditions and covenants applicable to the existing term loans under the Credit Agreement, including a maturity date of March 1, 2026.

The terms, conditions and covenants applicable to the Incremental Term Loans are the same as the terms, conditions and covenants applicable to the existing term loans under the Credit Agreement, including a maturity date of March 1, 2026.

On March 2, 2020 (the “Amendment No.

11 unchanged sentences

VFH is also subject to contingent principal prepayments based on excess cash flow and certain other triggering events.

Borrowings under the Amended Credit Agreement are guaranteed by Virtu Financial and VFH’s material non-regulated domestic restricted subsidiaries and secured by substantially all of the assets of VFH and the guarantors, in each case, subject to certain exceptions.

Borrowings under the Amended Credit Agreement are guaranteed by Virtu Financial and

VFH’s material non-regulated domestic restricted subsidiaries and secured by substantially all of the assets of VFH and the guarantors, in each case, subject to certain exceptions.

Under the Amended Credit Agreement, term loans will mature on March 1, 2026.

2 unchanged sentences

During the year ended December 31, 2019, $ 100.0 million was repaid under the First Lien Term Loan Facility.

As of March 31, 2020 , $ 1,925 million was outstanding under the First Lien Term Loan Facility.

In May of 2020, an additional $ 188.5 million was repaid under this facility.

As of June 30, 2020, $ 1,737 million was outstanding under the First Lien Term Loan Facility.

The Amended Credit Agreement contains certain customary covenants and events of default, including relating to a change of control.

19 unchanged sentences

In December 2019, the maturity date of the SBI Bonds was extended to January 2023.

The principal balance was ¥ 3.5 billion ( $ 32.5 million ) as of March 31, 2020 and ¥ 3.5 billion ( $ 32.2 million ) as of December 31, 2019 .

The Company recorded a gain of $ 0.3 million and a loss of $ 0.4 million during the three months ended March 31, 2020 and 2019 , respectively.

As of March 31, 2020 , aggregate future required minimum principal payments based on the terms of the long-term borrowings were as follows:

(in thousands)

March 31, 2020

The principal balance was ¥ 3.5 billion ($ 32.4 million) as of June 30, 2020 and ¥ 3.5 billion ($ 32.2 million) as of December 31, 2019.

The Company recorded a gain of $ 0.1 million and a loss of $ 0.9 million during the three months ended June 30, 2020 and 2019, respectively, and a loss of $ 0.2 million and a loss of $ 0.5 million during the six months ended June 30, 2020 and 2019, respectively.

As of June 30, 2020, aggregate future required minimum principal payments based on the terms of the long-term borrowings were as follows:

(in thousands) June 30, 2020

Thereafter 1,736,512

Total principal of long-term borrowings $ 1,768,940

12 unchanged sentences

Consequently, such financial instruments are classified as Level 2.

There were no transfers of financial instruments between levels during the three months ended March 31, 2020 or 2019 .

Fair value measurements for those items measured on a recurring basis are summarized below as of March 31, 2020 :

March 31, 2020

(in thousands)

Quoted Prices in Active Markets for Identical Assets (Level 1)

Significant Other Observable Inputs (Level 2)

Significant Unobservable Inputs (Level 3)

Counterparty and Cash Collateral Netting

Total Fair Value

There were no transfers of financial instruments between levels during the three and six months ended June 30, 2020 or 2019.

Fair value measurements for those items measured on a recurring basis are summarized below as of June 30, 2020:

June 30, 2020

(in thousands) Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) Counterparty and Cash Collateral Netting Total Fair Value

Financial instruments owned, at fair value:

4 unchanged sentences

Currency forwards — 201,365 — ( 190,354 ) 11,011

Options 9,456 — — — 9,456

636,395 1,592,581 — ( 190,354 ) 2,038,622

Financial instruments owned, pledged as collateral:

1 unchanged sentence

Exchange traded notes 3 27,733 — — 27,736

332,706 270,265 — — 602,971

Equity investment — — 51,599 — 51,599

Exchange stock 2,043 — — — 2,043

2,043 — 51,599 — 53,642

Financial instruments sold, not yet purchased, at fair value:

4 unchanged sentences

Currency forwards — 190,909 — ( 190,877 ) 32

Options 16,303 — — — 16,303

$ 1,447,233 $ 1,497,491 $ — $ ( 190,877 ) $ 2,753,847

Fair value measurements for those items measured on a recurring basis are summarized below as of December 31, 2019:

December 31, 2019

(in thousands)

Quoted Prices in Active Markets for Identical Assets (Level 1)

Significant Other Observable Inputs (Level 2)

Significant Unobservable Inputs (Level 3)

Counterparty and Cash Collateral Netting

Total Fair Value

Financial instruments owned, at fair value:

4 unchanged sentences

Currency forwards — 242,552 — ( 211,398 ) 31,154

Options 8,538 — — — 8,538

715,730 1,564,402 — ( 211,398 ) 2,068,734

Financial instruments owned, pledged as collateral:

2 unchanged sentences

Exchange traded notes 12 42,578 — — 42,590

362,451 334,505 — — 696,956

Equity investment — — 46,245 — 46,245

Exchange stock 2,721 — — — 2,721

2,721 — 46,245 — 48,966

Financial instruments sold, not yet purchased, at fair value:

4 unchanged sentences

Currency forwards — 196,554 — ( 196,535 ) 19

Options 3,087 — — — 3,087

$ 1,065,007 $ 1,629,486 $ — $ ( 196,535 ) $ 2,497,958

SBI Investment

3 unchanged sentences

The SBI Investment is included within Level 3 of the fair value hierarchy.

As of March 31, 2020 , the fair value of the SBI Investment was determined using a weighted average of valuations using 1) the discounted cash flow method, an income approach;

As of June 30, 2020, the fair value of the SBI Investment was determined using a weighted average of valuations using 1) the discounted cash flow method, an income approach;

2) a market approach based on average enterprise value/EBITDA ratios of comparable companies;

and 3) a transaction approach based on transaction values of comparable companies.

and to a lesser extent 3) a transaction approach based on transaction values of comparable companies.

The fair value measurement is highly sensitive to significant changes in the unobservable inputs, and significant increases (decreases) in discount rate or decreases (increases) in enterprise value/EBITDA multiples would result in a significantly lower (higher) fair value measurement.

The table below presents information on the valuation techniques, significant unobservable inputs and their ranges for the SBI Investment:

March 31, 2020

(in thousands)

Valuation Technique

Significant Unobservable Input

Weighted Average

Equity investment

Discounted cash flow

Estimated revenue growth

June 30, 2020

(in thousands) Fair Value Valuation Technique Significant Unobservable Input Range Weighted Average

Equity investment $ 51,599 Discounted cash flow Estimated revenue growth ( 7.4 )% - 20.0 %

Discount rate 14.4 % - 14.4 %

14.4% - 14.4%

Future enterprise value/ EBIDTA ratio

11.9x - 55.7x

Market Future enterprise value/ EBIDTA ratio 11.9 x - 55.7 x

Changes in the fair value of the SBI Investment are included within Other, net in the Condensed Consolidated Statements of Comprehensive Income.

The following presents the changes in the Company's Level 3 financial instruments measured at fair value on a recurring basis:

Three Months Ended March 31, 2020

(in thousands)

Balance at December 31, 2019

Total Realized and Unrealized Gains / (Losses)

Net Transfers into (out of) Level 3

Balance at March 31, 2020

Change in Net Unrealized Gains / (Losses) on Investments still held at March 31, 2020

Three Months Ended June 30, 2020

(in thousands) Balance at March 31, 2020 Purchases Total Realized and Unrealized Gains / (Losses) Net Transfers into (out of) Level 3 Settlement Balance at June 30, 2020 Change in Net Unrealized Gains / (Losses) on Investments still held at June 30, 2020

Other assets:

Equity investment $ 46,668 $ — $ 4,931 $ — $ — $ 51,599 $ 4,931

Three Months Ended March 31, 2019

(in thousands)

Balance at December 31, 2018

Total Realized and Unrealized Gains / (Losses)

Net Transfers into (out of) Level 3

Balance at March 31, 2019

Change in Net Unrealized Gains / (Losses) on Investments still held at March 31, 2019

Total $ 46,668 $ — $ 4,931 $ — $ — $ 51,599 $ 4,931

Three Months Ended June 30, 2019

(in thousands) Balance at March 31, 2019 Purchases Total Realized and Unrealized Gains / (Losses) Net Transfers into (out of) Level 3 Settlement Balance at June 30, 2019 Change in Net Unrealized Gains / (Losses) on Investments still held at June 30, 2019

Other assets:

Equity investment $ 46,529 $ — $ ( 178 ) $ — $ — $ 46,351 $ ( 178 )

Total $ 46,529 $ — $ ( 178 ) $ — $ — $ 46,351 $ ( 178 )

Six Months Ended June 30, 2020

(in thousands) Balance at December 31, 2019 Purchases Total Realized and Unrealized Gains / (Losses) Net Transfers into (out of) Level 3 Settlement Balance at June 30, 2020 Change in Net Unrealized Gains / (Losses) on Investments still held at June 30, 2020

Other assets:

Equity investment $ 46,245 $ — $ 5,354 $ — $ — $ 51,599 $ 5,354

Total $ 46,245 $ — $ 5,354 $ — $ — $ 51,599 $ 5,354

Six Months Ended June 30, 2019

(in thousands) Balance at December 31, 2018 Purchases Total Realized and Unrealized Gains / (Losses) Net Transfers into (out of) Level 3 Settlement Balance at June 30, 2019 Change in Net Unrealized Gains / (Losses) on Investments still held at June 30, 2019

Other assets:

Equity investment $ 45,856 $ — $ 495 $ — $ — $ 46,351 $ 495

Total $ 45,856 $ — $ 495 $ — $ — $ 46,351 $ 495

Financial Instruments Not Measured at Fair Value

3 unchanged sentences

The fair value of the Company’s long-term borrowings is based on quoted prices from the market for similar instruments, and is categorized as Level 2 in the fair value hierarchy.

The table below summarizes financial assets and liabilities not carried at fair value on a recurring basis as of March 31, 2020 :

March 31, 2020

Carrying Value

Quoted Prices in Active Markets for Identical Assets

Significant Other Observable Inputs

Significant Unobservable Inputs

The table below summarizes financial assets and liabilities not carried at fair value on a recurring basis as of June 30, 2020:

June 30, 2020

Carrying Value Quoted Prices in Active Markets for Identical Assets Significant Other Observable Inputs Significant Unobservable Inputs

(in thousands)

Fair Value (Level 1) (Level 2) (Level 3)

Cash and cash equivalents $ 670,770 $ 670,770 $ 670,770 $ — $ —

3 unchanged sentences

Receivables from broker-dealers and clearing organizations 2,441,283 2,441,283 495,079 1,946,204 —

Total Assets 4,869,317 4,869,317 1,243,094 3,626,223 —

Short-term borrowings 26,274 26,274 — 26,274 —

6 unchanged sentences

December 31, 2019

Carrying Value

Quoted Prices in Active Markets for Identical Assets

Significant Other Observable Inputs

Significant Unobservable Inputs

Carrying Value Quoted Prices in Active Markets for Identical Assets Significant Other Observable Inputs Significant Unobservable Inputs

(in thousands)

Fair Value (Level 1) (Level 2) (Level 3)

Cash and cash equivalents $ 732,164 $ 732,164 $ 732,164 $ — $ —

3 unchanged sentences

Receivables from broker-dealers and clearing organizations 1,318,584 1,318,584 40,842 1,277,742 —

Total Assets 4,163,659 4,163,659 814,122 3,349,537 —

Short-term borrowings 73,486 75,586 — 75,586 —

8 unchanged sentences

In the tables below, the amounts of financial instruments owned that are not offset in the Condensed Consolidated Statements of Financial Condition, but could be netted against financial liabilities with specific counterparties under legally enforceable master netting agreements in the event of default, are presented to provide financial statement readers with the Company’s estimate of its net exposure to counterparties for these financial instruments.

The following tables set forth the gross and net presentation of certain financial assets and financial liabilities as of March 31, 2020 and December 31, 2019 :

March 31, 2020

Gross Amounts of Recognized Assets

Gross Amounts Offset in the Condensed Consolidated Statement of Financial Condition

Net Amounts of Assets Presented in the Condensed Consolidated Statement of Financial Condition

The following tables set forth the gross and net presentation of certain financial assets and financial liabilities as of June 30, 2020 and December 31, 2019:

June 30, 2020

Gross Amounts of Recognized Assets Gross Amounts Offset in the Condensed Consolidated Statement of Financial Condition Net Amounts of Assets Presented in the Condensed Consolidated Statement of Financial Condition

Gross Amounts Not Offset in the Condensed Consolidated Statement of Financial Condition

(in thousands)

Financial Instruments

Counterparty Netting/ Cash Collateral

(in thousands) Financial Instruments Counterparty Netting/ Cash Collateral Net Amount

Offsetting of Financial Assets:

3 unchanged sentences

Currency forwards 201,365 ( 190,354 ) 11,011 — — 11,011

Gross Amounts of Recognized Liabilities

Gross Amounts Offset in the Condensed Consolidated Statement of Financial Condition

Net Amounts of Liabilities Presented in the Condensed Consolidated Statement of Financial Condition

Options 9,456 — 9,456 — ( 9,455 ) 1

Total $ 1,890,840 $ ( 190,354 ) $ 1,700,486 $ ( 1,646,951 ) $ ( 14,824 ) $ 38,711

Gross Amounts of Recognized Liabilities Gross Amounts Offset in the Condensed Consolidated Statement of Financial Condition Net Amounts of Liabilities Presented in the Condensed Consolidated Statement of Financial Condition

Gross Amounts Not Offset in the Condensed Consolidated Statement of Financial Condition

(in thousands)

Financial Instruments

Counterparty Netting/ Cash Collateral

(in thousands) Financial Instruments Counterparty Netting/ Cash Collateral Net Amount

Offsetting of Financial Liabilities:

5 unchanged sentences

Currency forwards 190,909 ( 190,877 ) 32 — — 32

Options 16,303 — 16,303 — ( 9,455 ) 6,848

Total $ 1,792,737 $ ( 190,877 ) $ 1,601,860 $ ( 1,503,085 ) $ ( 83,193 ) $ 15,582

December 31, 2019

Gross Amounts of Recognized Assets

Gross Amounts Offset in the Consolidated Statement of Financial Condition

Net Amounts of Assets Presented in the Consolidated Statement of Financial Condition

Gross Amounts of Recognized Assets Gross Amounts Offset in the Consolidated Statement of Financial Condition Net Amounts of Assets Presented in the Consolidated Statement of Financial Condition

Gross Amounts Not Offset in the Consolidated Statement of Financial Condition

(in thousands)

Financial Instruments

Counterparty Netting/ Cash Collateral

(in thousands) Financial Instruments Counterparty Netting/ Cash Collateral Net Amount

Offsetting of Financial Assets:

3 unchanged sentences

Currency forwards 242,552 ( 211,398 ) 31,154 — — 31,154

Gross Amounts of Recognized Liabilities

Gross Amounts Offset in the Consolidated Statement of Financial Condition

Net Amounts of Liabilities Presented in the Consolidated Statement of Financial Condition

Options 8,538 — 8,538 ( 8,537 ) — 1

Total $ 2,322,885 $ ( 211,398 ) $ 2,111,487 $ ( 2,032,464 ) $ ( 15,280 ) $ 63,743

Gross Amounts of Recognized Liabilities Gross Amounts Offset in the Consolidated Statement of Financial Condition Net Amounts of Liabilities Presented in the Consolidated Statement of Financial Condition

Gross Amounts Not Offset in the Consolidated Statement of Financial Condition

(in thousands)

Financial Instruments

Counterparty Netting/ Cash Collateral

(in thousands) Financial Instruments Counterparty Netting/ Cash Collateral Net Amount

Offsetting of Financial Liabilities:

3 unchanged sentences

Currency forwards 196,554 ( 196,535 ) 19 — — 19

Options 3,087 — 3,087 ( 3,087 ) — —

Total $ 2,140,482 $ ( 196,535 ) $ 1,943,947 $ ( 1,895,951 ) $ ( 15,281 ) $ 32,715

The following table presents gross obligations for securities sold under agreements to repurchase and for securities lending transactions by remaining contractual maturity and the class of collateral pledged:

March 31, 2020

June 30, 2020

Remaining Contractual Maturity

(in thousands)

Overnight and Continuous

Less than 30 days

(in thousands) Overnight and Continuous Less than 30 days 30 - 60

Days Greater than 90

Securities sold under agreements to repurchase:

1 unchanged sentence

government obligations 12,568 12,568

Total 12,568 50,000 50,000 150,000 50,000 312,568

Securities loaned:

Equity securities 1,204,114 — — — — 1,204,114

Total $ 1,204,114 $ — $ — $ — $ — $ 1,204,114

December 31, 2019

Remaining Contractual Maturity

(in thousands)

Overnight and Continuous

Less than 30 days

(in thousands) Overnight and Continuous Less than 30 days 30 - 60

Days Greater than 90

Securities sold under agreements to repurchase:

1 unchanged sentence

government obligations 65,742 — — — — 65,742

Total 65,742 75,000 50,000 150,000 — 340,742

Securities loaned:

Equity securities 1,600,099 — — — — 1,600,099

Total $ 1,600,099 $ — $ — $ — $ — $ 1,600,099

Derivative Instruments

The fair value of the Company’s derivative instruments on a gross basis consisted of the following at March 31, 2020 and December 31, 2019 :

(in thousands)

March 31, 2020

December 31, 2019

Derivatives Assets

Financial Statements Location

The fair value of the Company’s derivative instruments on a gross basis consisted of the following at June 30, 2020 and December 31, 2019:

(in thousands) June 30, 2020 December 31, 2019

Derivatives Assets Financial Statements Location Fair Value Notional Fair Value Notional

Derivative instruments not designated as hedging instruments:

Equities futures

Receivables from broker-dealers and clearing organizations

Commodity futures

Receivables from broker-dealers and clearing organizations

Currency futures

Receivables from broker-dealers and clearing organizations

Fixed income futures

Receivables from broker-dealers and clearing organizations

Financial instruments owned

Currency forwards

Financial instruments owned

Interest rate swap

Derivatives Liabilities

Financial Statements Location

Equities futures Receivables from broker-dealers and clearing organizations $ 4,006 $ 2,170,159 $ ( 1,366 ) $ 4,502,017

Commodity futures Receivables from broker-dealers and clearing organizations 495,103 6,949,099 40,656 7,758,974

Currency futures Receivables from broker-dealers and clearing organizations ( 58 ) 907,339 ( 2,860 ) 1,116,246

Fixed income futures Receivables from broker-dealers and clearing organizations ( 34 ) 15,512 47 155,697

Options Financial instruments owned 9,456 655,661 8,538 442,808

Currency forwards Financial instruments owned 201,365 24,829,993 242,552 24,369,818

Interest rate swap Other assets — — 8,976 525,000

Derivatives Liabilities Financial Statements Location Fair Value Notional Fair Value Notional

Derivative instruments not designated as hedging instruments:

Equities futures

Payables to broker-dealers and clearing organizations

Commodity futures

Payables to broker-dealers and clearing organizations

Currency futures

Payables to broker-dealers and clearing organizations

Fixed income futures

Payables to broker-dealers and clearing organizations

Financial instruments sold, not yet purchased

Currency forwards

Financial instruments sold, not yet purchased

Equities futures Payables to broker-dealers and clearing organizations $ ( 1,004 ) $ 97,216 $ 751 $ 83,803

Commodity futures Payables to broker-dealers and clearing organizations ( 2,907 ) 45,279 ( 45,175 ) 3,604,979

Currency futures Payables to broker-dealers and clearing organizations 4,192 1,735,199 ( 23,223 ) 6,594,991

Fixed income futures Payables to broker-dealers and clearing organizations — 88,070 94 190,938

Options Financial instruments sold, not yet purchased 16,303 669,130 3,087 436,422

Currency forwards Financial instruments sold, not yet purchased 190,909 24,824,765 196,554 24,346,818

Derivative instruments designated as hedging instruments:

Interest rate swaps

Payables to broker-dealers and clearing organizations

Amounts included in receivables from and payables to broker-dealers and clearing organizations represent net variation margin on long and short futures contracts.

The following table summarizes the net gain (loss) from derivative instruments not designated as hedging instruments under ASC 815, which are recorded in total revenues, and from those designated as hedging instruments under ASC 815, which are recorded in other comprehensive income in the accompanying Condensed Consolidated Statements of Comprehensive Income for the three months ended March 31, 2020 and 2019 .

Three Months Ended March 31,

(in thousands)

Financial Statements Location

Interest rate swaps Payables to broker-dealers and clearing organizations 68,843 1,525,000 — —

Amounts included in receivables from and payables to broker-dealers and clearing organizations represent net variation margin on long and short futures contracts as well as amounts receivable or payable on interest rate swaps.

Three Months Ended June 30, Six Months Ended June 30,

(in thousands) Financial Statements Location 2020 2019 2020 2019

Derivative instruments not designated as hedging instruments:

Trading income, net

Currency forwards

Trading income, net

Futures Trading income, net $ 35,603 $ 83,225 $ 23,702 $ 155,610

Currency forwards Trading income, net ( 9,229 ) ( 20,869 ) 192,579 ( 45,042 )

Options Trading income, net 25,039 4,335 26,300 4,997

$ 51,413 $ 66,691 $ 242,581 $ 115,565

Derivative instruments designated as hedging instruments:

Interest rate swaps (1)

Other comprehensive income

Interest rate swaps (1) Other comprehensive income $ ( 9,137 ) $ — $ ( 64,739 ) $ —

(1) On January 29, 2020, the Company entered into a five-year $ 1,000 million floating-to-fixed interest rate swap agreement.

The Company also previously entered into a five-year $ 525 million floating-to-fixed interest rate swap agreement.

As of January 1, 2020, these two interest rate swaps meet the criteria to be considered qualifying cash flow hedges under ASC 815, and as such, the mark-to-market gains (losses) on the instruments were recorded within Other comprehensive income on the Condensed Consolidated Statement of Comprehensive Income for the three months ended March 31, 2020 .

As of January 1, 2020, these two interest rate swaps met the criteria to be considered qualifying cash flow hedges under ASC 815, and as such, the mark-to-market gains (losses) on the instruments were recorded within Other comprehensive income on the Condensed Consolidated Statement of Comprehensive Income for the three and six months ended June 30, 2020.

Revenues from Contracts with Customers

2 unchanged sentences

The Company’s revenue recognition methods for its contracts with customers prior to the adoption of Topic 606 are consistent with its methods after the adoption of Topic 606.

Accordingly, the adoption of the new standard did not result in a transition adjustment to opening retained earnings, and as a result, revenues for contracts with customers would not have been adjusted in prior periods and are not presented herein on an adjusted basis.

As a result of the ITG Acquisition, subsequent to the ITG Closing Date, the Company has additional revenue streams as described below.

The guidance in ASC 606 does not apply to revenue associated with financial instruments, including loans and securities that are accounted for under other U.S.

GAAP, and as a result, did not have an impact on the market making elements of the Company’s Condensed Consolidated Statement of Comprehensive Income most closely associated with financial instruments, including Trading income, net and Interest and dividend income.

The guidance primarily impacts the presentation of the Company's Execution Services revenue streams discussed below, all of which are presented within Commissions, net and technology services on the Company’s Condensed Consolidated Statements of Comprehensive Income.

Commissions, net .

6 unchanged sentences

Technology services.

The Company’s technology services revenues consist of technology licensing fees and client commission fees.

These fees include both upfront and annual recurring fees as well as, in certain cases, contingent fees based on customer revenues, which represent variable consideration.

The services offered under these contracts are delivered as an integrated package and are interdependent and have the same pattern of transfer to the customer;

accordingly, the Company measures and recognizes them as a single performance obligation.

The performance obligation is satisfied over time, and, therefore, revenue is recognized as time passes.

revenue recognized will not occur.

Recurring fees, which exclude variable consideration, are billed and collected on a quarterly basis and are included within Receivables from broker-dealers and clearing organizations.

Workflow technology.

16 unchanged sentences

Customers agree to pay for analytics products and services with commissions generated from trade execution services, and commissions are allocated to the analytics performance obligation(s) using:

the commission value for each customer for the products and services it receives, which is priced using the value for similar stand-alone subscription arrangements;

a calculated ratio of the commission value for the products and services relative to the total amount of commissions generated from the customer.

(i) the commission value for each customer for the products and services it receives, which is priced using the value for similar stand-alone subscription arrangements;

(ii) a calculated ratio of the commission value for the products and services relative to the total amount of commissions generated from the customer.

For these bundled commission arrangements, the allocated commissions to each analytics performance obligation are then recognized as revenue when the analytics product is delivered, either over time or at a point in time.

1 unchanged sentence

Disaggregation of Revenues

The following tables present the Company’s revenue from contracts with customers disaggregated by the services described above, by timing of revenue recognition, reconciled to the Company’s segments, for the three months ended March 31, 2020 and 2019 :

Three Months Ended March 31, 2020

(in thousands)

Market Making

Execution Services

Three Months Ended June 30, 2020

(in thousands) Market Making Execution Services Corporate Total

Revenues from contracts with customers:

1 unchanged sentence

Workflow technology — 26,589 — 26,589

Analytics — 10,444 — 10,444

Total revenue from contracts with customers ( 634 ) 148,370 — 147,736

5 unchanged sentences

Total Revenues $ 759,117 $ 148,076 $ ( 1,290 ) $ 905,903

Three Months Ended March 31, 2019

(in thousands)

Market Making

Execution Services

Three Months Ended June 30, 2019

(in thousands) Market Making Execution Services Corporate Total

Revenues from contracts with customers:

1 unchanged sentence

Workflow technology — 25,455 — 25,455

Analytics — 10,977 — 10,977

Total revenue from contracts with customers 4,961 140,159 — 145,120

5 unchanged sentences

Total revenues $ 234,029 $ 141,470 $ ( 398 ) $ 375,101

Six Months Ended June 30, 2020

(in thousands) Market Making Execution Services Corporate Total

Revenues from contracts with customers:

Commissions, net $ 136 $ 242,363 $ — $ 242,499

Workflow technology — 55,332 — 55,332

Analytics — 20,650 — 20,650

Total revenue from contracts with customers 136 318,345 — 318,481

Other sources of revenue 1,589,567 ( 404 ) ( 1,120 ) 1,588,043

Total revenues 1,589,703 317,941 ( 1,120 ) 1,906,524

Timing of revenue recognition:

Services transferred at a point in time 1,589,703 280,665 ( 1,120 ) 1,869,248

Services transferred over time — 37,276 — 37,276

Total revenues $ 1,589,703 $ 317,941 $ ( 1,120 ) $ 1,906,524

Six Months Ended June 30, 2019

(in thousands) Market Making Execution Services Corporate Total

Revenues from contracts with customers:

Commissions, net $ 9,961 $ 161,482 $ — $ 171,443

Workflow technology — 34,327 — 34,327

Analytics — 14,497 14,497

Total revenue from contracts with customers 9,961 210,306 — 220,267

Other sources of revenue 502,313 14,214 ( 1,261 ) 515,266

Total revenues 512,274 224,520 ( 1,261 ) 735,533

Timing of revenue recognition:

Services transferred at a point in time 512,274 197,470 ( 1,261 ) 708,483

Services transferred over time — 27,050 — 27,050

Total revenues $ 512,274 $ 224,520 $ ( 1,261 ) $ 735,533

Remaining Performance Obligations and Revenue Recognized from Past Performance Obligations

As of March 31, 2020 , the aggregate amount of the transaction price allocated to the performance obligations relating to technology services, workflow technology, and analytics revenues that are unsatisfied (or partially unsatisfied) was not material.

As of June 30, 2020, the aggregate amount of the transaction price allocated to the performance obligations relating to technology services, workflow technology, and analytics revenues that are unsatisfied (or partially unsatisfied) was not material.

The Company recognized $ 0.7 million and $ 0.5 million of revenue related to performance obligations satisfied in previous period for the three and six months ended June 30, 2020 and 2019, respectively.

Contract Assets and Contract Liabilities

2 unchanged sentences

The Company records a contract liability when payment is received prior to the time at which the satisfaction of the service obligation occurs.

Receivables related to revenues from contracts with customers amounted to $ 70.2 million and $ 53.6 million as of March 31, 2020 and December 31, 2019 , respectively.

Receivables related to revenues from contracts with customers amounted to $ 59.3 million and $ 53.6 million as of June 30, 2020 and December 31, 2019, respectively.

The Company did not identify any contract assets.

There were no impairment losses on receivables as of March 31, 2020 .

There were no impairment losses on receivables as of June 30, 2020.

Deferred revenue primarily relates to deferred commissions allocated to analytics products and subscription fees billed in advance of satisfying the performance obligations.

Deferred revenue related to contracts with customers was $ 11.9 million and $ 8.6 million as of March 31, 2020 and December 31, 2019 , respectively.

During the three months ended March 31, 2020 and 2019 , the Company recognized revenue of $ 7.5 million and $ 8.0 million , respectively, that had been initially recorded as deferred revenue.

Deferred revenue related to contracts with customers was $ 8.1 million and $ 8.6 million as of June 30, 2020 and December 31, 2019, respectively.

The Company recognized revenue of $ 7.6 million and $ 7.8 million for the three months ended June 30, 2020 and 2019, respectively, and $ 15.1 million and $ 14.9 million for the six months ended June 30, 2020 and 2019, respectively that had been initially recorded as deferred revenue.

The Company has not identified any costs to obtain or fulfill its contracts under ASC 606.

3 unchanged sentences

taxation as partnerships.

Accordingly, for the three months ended March 31, 2020 and 2019 , the income attributable to these noncontrolling interests is reported in the Condensed Consolidated Statements of Comprehensive Income, but the related U.S.

income tax expense attributable to these noncontrolling interests is not reported by the Company as it is the obligation of the individual partners.

The Company’s provisions for (benefits from) income taxes and effective tax rates were $ 78.0 million and 16.8 % , and $( 2.6 ) million and 16.0 % , for the three months ended March 31, 2020 and 2019 , respectively.

Accordingly, for the three and six months ended June 30, 2020 and 2019, the income attributable to these noncontrolling interests was reported in the Condensed Consolidated Statements of Comprehensive Income, but the related U.S.

income tax expense attributable to these noncontrolling interests was not reported by the Company as it is the obligation of the individual partners.

The Company’s provisions for (benefits from) income taxes and effective tax rates were $ 69.3 million, 17.1 %, and $( 11.1 ) million, 16.7 % for the three months ended June 30, 2020 and 2019, respectively, and $ 147.2 million, 16.9 %, and $( 13.7 ) million, 16.5 %, for the six months ended June 30, 2020 and 2019, respectively.

Income tax expense is also affected by the differing effective tax rates in foreign, state and local jurisdictions where certain of the Company’s subsidiaries are subject to corporate taxation.

Included in Other assets on the Condensed Consolidated Statements of Financial Condition at March 31, 2020 and December 31, 2019 are current income tax receivables of $ 4.5 million and $ 39.3 million , respectively.

The balances at March 31, 2020 and December 31, 2019 primarily comprise income tax benefits due to the Company from federal, state and local, and foreign tax jurisdictions based on income before taxes.

Included in Accounts payable, accrued expenses and other liabilities on the Condensed Consolidated Statements of Financial Condition at March 31, 2020 and December 31, 2019 are current tax liabilities of $ 45.0 million and $ 11.5 million , respectively.

The balances at March 31, 2020 and December 31, 2019 primarily comprise income taxes owed to federal, state and local, and foreign tax jurisdictions based on income before taxes.

Included in Other assets on the Condensed Consolidated Statements of Financial Condition at June 30, 2020 and December 31, 2019 were current income tax receivables of $ 18.9 million and $ 39.3 million, respectively.

The balances at June 30, 2020 and December 31, 2019 primarily comprised income tax benefits due to the Company from federal, state, local, and foreign tax jurisdictions based on income before taxes.

Included in Accounts payable, accrued expenses and other liabilities on the Condensed Consolidated Statements of Financial Condition at June 30, 2020 and December 31, 2019 were current tax liabilities of $ 71.0 million and $ 11.5 million, respectively.

The balances at June 30, 2020 and December 31, 2019 primarily comprised income taxes owed to federal, state and local, and foreign tax jurisdictions based on income before taxes.

Deferred income taxes arise primarily due to the amortization of the deferred tax assets recognized in connection with the IPO (see Note 5 “Tax Receivable Agreements”), the Acquisition of KCG and the ITG Acquisition (see Note 3 “ITG Acquisition”), differences in the valuation of financial assets and liabilities, and other temporary differences arising from the deductibility of compensation, depreciation, and other expenses in different time periods for book and income tax return purposes.

2 unchanged sentences

Accordingly, the need to establish valuation allowances for deferred tax assets is assessed periodically with appropriate consideration given to all positive and negative evidence related to the realization of the deferred tax assets.

At March 31, 2020 and December 31, 2019 , the Company had U.S.

At June 30, 2020 and December 31, 2019, the Company had U.S.

federal net operating loss carryforwards of $ 0.0 million and $ 91.3 million, respectively, and has recorded a deferred tax asset related to these federal net operating carryforwards of $ 0.0 million and $ 19.2 million, respectively.

The Company did not record a valuation allowance against this deferred tax asset.

At March 31, 2020 , the Company recorded deferred income taxes related to state and local net operating losses of $ 3.7 million .

At June 30, 2020, the Company recorded deferred income taxes related to state and local net operating losses of $ 3.7 million.

These net operating losses will begin to expire in 2031.

The Company did not record a valuation allowance against this deferred tax asset.

As a result of the ITG Acquisition, the Company has non-U.S.

net operating losses at March 31, 2020 and December 31, 2019 of $ 80.2 million and $ 86.3 million , respectively, and has recorded a related deferred tax asset of $ 16.1 million and $ 17.9 million , respectively.

A valuation allowance of $ 14.5 million and $ 15.6 million was recorded against this deferred tax asset at March 31, 2020 and December 31, 2019 , respectively, as it is more likely than not that a portion of this deferred tax asset will not be realized.

As a result of the Acquisition of KCG, the Company has non-U.S.

net operating losses at March 31, 2020 and December 31, 2019 of $ 239.0 million and $ 239.0 million , respectively, and has recorded a related deferred tax asset of $ 44.9 million and $ 44.9 million , respectively.

A full valuation allowance was also recorded against this deferred tax asset at March 31, 2020 and December 31, 2019 as it is more likely than not that this deferred tax asset will not be realized.

No valuation allowance against the remaining deferred taxes was recorded as of March 31, 2020 and December 31, 2019 because it

is more likely than not that these deferred tax assets will be fully realized.

As a result of the ITG Acquisition, the Company had non-U.S.

net operating losses at June 30, 2020 and December 31, 2019 of $ 76.0 million and $ 86.3 million, respectively, and recorded a related deferred tax asset of $ 15.5 million and $ 17.9 million, respectively.

A valuation allowance of $ 15.1 million and $ 15.6 million was recorded against this deferred tax asset at June 30, 2020 and December 31, 2019, respectively, as it is more likely than not that a portion of this deferred tax asset will not be realized.

As a result of the Acquisition of KCG, the Company had non-U.S.

net operating losses at June 30, 2020 and December 31, 2019 of $ 239.0 million and $ 239.0 million, respectively, and recorded a related deferred tax asset of $ 44.9 million and $ 44.9 million, respectively.

A full valuation allowance was also recorded against this deferred tax asset at June 30, 2020 and December 31, 2019 as it is more likely than not that this deferred tax asset will not be realized.

No valuation allowance against the remaining deferred taxes was recorded as of June 30, 2020 and December 31, 2019 because it is more

likely than not that these deferred tax assets will be fully realized.

The Company is subject to taxation in U.S.

federal, state, local and foreign jurisdictions.

As of March 31, 2020 , the Company’s tax years for 2013 through 2018 and 2010 through 2018 are subject to examination by U.S.

As of June 30, 2020, the Company’s tax years for 2013 through 2018 and 2010 through 2018 were subject to examination by U.S.

tax authorities, respectively.

As a result of the ITG Acquisition and the Acquisition of KCG, the Company has assumed any ITG and KCG tax exposures.

As a result of the ITG Acquisition and the Acquisition of KCG, the Company assumed any ITG and KCG tax exposures.

In addition, the Company is subject to state and local income tax examinations in various jurisdictions for the tax years 2013 through 2018.

2 unchanged sentences

The Company’s policy for recording interest and penalties associated with audits is to record such items as a component of income or loss before income taxes and noncontrolling interest.

Penalties, if any, are recorded in Operations and administrative expense and interest received or paid is recorded in Other, net or Operations and administrative expense in the Condensed Consolidated Statement of Comprehensive Income.

The Company had $ 8.9 million of unrecognized tax benefits as of March 31, 2020 , all of which would affect the Company’s effective tax rate if recognized.

The Company has determined that there are no uncertain tax positions that would have a material impact on the Company’s financial position as of March 31, 2020 .

The Company had $ 9.0 million of unrecognized tax benefits as of June 30, 2020, all of which would affect the Company’s effective tax rate if recognized.

The Company has determined that there are no uncertain tax positions that would have a material impact on the Company’s financial position as of June 30, 2020.

Commitments, Contingencies and Guarantees

7 unchanged sentences

The Company carries directors’ and officers’ liability insurance coverage and other insurance coverage for potential claims, including securities actions, against the Company and its respective directors and officers.

In connection with the Acquisition of KCG, a previously filed complaint, which was initially captioned Greenway v.

KCG Holdings, Inc., et al., Case No.

2017-421-JTL and filed on behalf of a putative class in Delaware Chancery Court, was recaptioned Chester County Employees’ Retirement Fund v.

KCG Holdings, Inc., et al.

, amended and refiled on February 14, 2018 to include claims for the alleged breach of fiduciary duties against former KCG board members, claims against each of the Company and Jefferies LLC for allegedly aiding and abetting the KCG board members’ alleged breaches of fiduciary duty and a claim against the Company and Jefferies LLC for alleged civil conspiracy.

The amended complaint was again amended on July 16, 2018 with the filing of the Verified Second Amended Class Action Complaint (the “Second Amended Complaint”) to include additional factual allegations.

In October 2019, the parties reached an agreement in principle to settle the matter, and in March 2020 definitive settlement documentation was executed and final court approval was obtained.

The settlement contains no admission of any liability or wrongdoing on the part of the defendants, each of whom continues to deny all of the allegations against them and believes that the claims are without merit.

On January 29, 2019, the Company was named as a defendant in Ford v.

ProShares Trust II, et al.

The complaint was filed in federal district court in New York on behalf of a putative class, and asserts claims against the Company and numerous other financial institutions under Section 11 of the Securities Act of 1933 in connection with trading in a ProShares inverse-volatility ETF.

Additionally, on February 27, 2019, and March 1, 2019, the Company was named as a defendant in Bittner v.

4 unchanged sentences

The complaints were filed in federal district court in New York on behalf of putative classes, and asserted substantially similar claims against the Company and other financial institutions.

On April 29, 2019, these three actions were

consolidated in federal district court in New York as In re ProShares Trust II Securities Litigation , No.

On April 29, 2019, these three actions were consolidated in federal district court in New York as In re ProShares Trust II Securities Litigation , No.

19-cv-886-DLC.

1 unchanged sentence

Defendants moved to dismiss the consolidated amended complaint on August 2, 2019.

In response, plaintiffs filed a consolidated second amended complaint on September 6, 2019, which complaint also does not specify the amount of alleged damages.

In response, plaintiffs filed a consolidated second amended complaint on September 6, 2019, which also did not specify the amount of alleged damages.

Defendants moved to dismiss the consolidated second amended complaint on September 27, 2019.

The defendants’ motion to dismiss was granted on January 3, 2020, and plaintiffs subsequently filed a Notice of Appeal of the district court's ruling on the motion to dismiss on January 31, 2020.

The defendants’ motion to dismiss was granted on January 3, 2020, and plaintiffs subsequently filed a Notice of Appeal of the district court's ruling on the motion to dismiss on January 31, 2020 and an opening brief on May 14, 2020.

The Company believes that the claims are without merit and is defending itself vigorously.

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For example, in December 2015, the Autorité des Marchés Financiers (“AMF”) fined the Company’s European subsidiary in the amount of € 5.0 million (approximately $ 5.4 million) based on its allegations that the subsidiary of a predecessor entity engaged in price manipulation and violations of the AMF General Regulation and Euronext Market Rules.

The fine was subsequently reduced in 2017 to € 3.3 million (approximately $ 3.9 million ) and in 2018 was reduced to € 3.0 million (approximately $ 3.4 million ).

The Company has fully reserved for the monetary penalty as of March 31, 2020 and anticipates paying the fine during the year ended December 31, 2020.

The fine was subsequently reduced in 2017 to € 3.3 million (approximately $ 3.9 million) and in 2018 was further reduced to € 3.0 million (approximately $ 3.4 million).

The Company has fully reserved for the monetary penalty as of June 30, 2020 and anticipates paying the fine during the year ended December 31, 2020.

Representations and Warranties;

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These leases are primarily for corporate office space, datacenters, and technology equipment.

The leases have remaining terms of 1 year to 15 years , some of which include options to extend the initial term at the Company's discretion.

The leases have remaining

terms of 1 year to 15 years, some of which include options to extend the initial term at the Company's discretion.

The lease terms used in calculating ROU assets and lease liabilities include the options to extend the initial term when the Company is reasonably certain of exercising the options.

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The subleases have remaining terms of 1 to 12 years.

The Company recognizes sublease income on a straight-line basis over the term of the sublease within Other, net on the Condensed Consolidated Statement of Comprehensive Income.

The Company recognizes sublease income on a straight-line basis over the term of the sublease within Operations and administrative expense on the Condensed Consolidated Statement of Comprehensive Income.

As the implied discount rate for most of the Company's leases is not readily determinable, the Company uses its incremental borrowing rate on its secured borrowings in determining the present value of lease payments.

Lease assets and liabilities are summarized as follows:

(in thousands)

Financial Statement Location

March 31, 2020

December 31, 2019

(in thousands) Financial Statement Location June 30, 2020 December 31, 2019

Operating leases

Operating lease right-of-use assets

Operating lease liabilities

Operating lease right-of-use assets Operating lease right-of-use assets $ 294,531 $ 314,526

Operating lease liabilities Operating lease liabilities 339,602 365,364

Finance leases

Property and equipment, at cost

Property, equipment, and capitalized software, net

Accumulated depreciation

Property, equipment, and capitalized software, net

Finance lease liabilities

Accounts payable, accrued expenses, and other liabilities

Property and equipment, at cost Property, equipment, and capitalized software, net 36,046 37,589

Accumulated depreciation Property, equipment, and capitalized software, net ( 24,903 ) ( 24,579 )

Finance lease liabilities Accounts payable, accrued expenses, and other liabilities 11,405 13,371

Weighted average remaining lease term and discount rate are as follows:

March 31, 2020

December 31, 2019

June 30, 2020 December 31, 2019

Weighted average remaining lease term

Operating leases

Finance leases

Operating leases 7.20 years 7.50 years

Finance leases 1.64 years 1.45 years

Weighted average discount rate

2 unchanged sentences

The components of lease expense were as follows:

Three Months Ended June 30, Six Months Ended June 30,

(in thousands) 2020 2019 2020 2019

Three Months Ended March 31,

Operating lease cost:

Fixed $ 18,452 19,288 $ 36,812 $ 34,084

Variable 2,086 1,869 4,221 3,447

Impairment of ROU Asset — 25,857 — 25,857

Total Operating lease cost 20,538 47,014 41,033 63,388

4 unchanged sentences

Sublease income 4,118 3,355 7,595 5,915

Future minimum lease payments under operating and finance leases with non-cancelable lease terms, as of March 31, 2020 , are as follows:

(in thousands)

Operating Leases

Finance Leases

During the three months ended June 30, 2019, the Company ceased use of certain office lease premises as part of its

ongoing effort to consolidate office space.

For the three and six months ended June 30, 2019, the Company recognized $ 65.2 million in Termination of office leases on the Condensed Consolidated Statement of Comprehensive Income related to these premises, comprising $ 25.9 million of impairments of ROU assets, $ 37.9 million of write-offs of leasehold improvements and fixed assets, and $ 1.4 million of dilapidation charges.

There was no impairment of ROU assets during the three and six months ended June 30, 2020.

Future minimum lease payments under operating and finance leases with non-cancelable lease terms, as of June 30, 2020, are as follows:

(in thousands) Operating Leases Finance Leases

2020 $ 38,156 $ 5,414

2021 73,381 4,833

2022 67,130 2,094

2023 64,240 127

2024 33,928 —

2025 and thereafter 141,357 —

3 unchanged sentences

Future minimum lease payments under operating and finance leases with non-cancelable lease terms, as of December 31, 2019, are as follows:

(in thousands)

Operating Leases

Finance Leases

(in thousands) Operating Leases Finance Leases

2020 76,118 10,929

2021 73,062 3,305

2022 66,850 565

2023 63,676 —

2024 32,144 —

2025 and thereafter 141,371 —

3 unchanged sentences

The following table provides a reconciliation of cash and cash equivalents together with restricted or segregated cash as reported within the Condensed Consolidated Statements of Financial Condition to the sum of the same such amounts shown in the Condensed Consolidated Statements of Cash Flows.

(in thousands)

March 31, 2020

(in thousands) June 30,

2020 December 31, 2019

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In connection with the Reorganization Transactions, all Class A-2 profits interests and Class B interests were reclassified into Virtu Financial Units.

As of March 31, 2020 and December 31, 2019 , there were 7,195,625 and 7,919,952 Virtu Financial Units outstanding held by Employee Holdco (as defined below), respectively, and 724,327 and 240,000 of such Virtu Financial Units and corresponding Class C Common Stock were exchanged into Class A Common Stock, forfeited or repurchased during the three months ended March 31, 2020 and 2019 , respectively.

As of June 30, 2020 and December 31, 2019, there were 5,559,713 and 7,919,952 Virtu Financial Units outstanding held by Employee Holdco (as defined below), respectively, and 2,360,239 and 609,984 of such Virtu Financial Units and corresponding Class C Common Stock were exchanged into Class A Common Stock, forfeited or repurchased during the six months ended June 30, 2020 and 2019, respectively.

Amended and Restated 2015 Management Incentive Plan

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The Amended and Restated 2015 Management Incentive Plan provides for the grant of stock options, restricted stock units, and other awards based on an aggregate of 16,000,000 shares of Class A Common Stock, subject to additional sublimits, including limits on the total option grant to any one participant in a single year and the total performance award to any one participant in a single year.

On April 23, 2020, the Company’s board of directors adopted an amendment to the Company’s Amended and Restated 2015 Management Incentive Plan in order to increase the number of shares of the Company’s Class A Common Stock reserved for issuance, and in respect of which awards may be granted under the Amended and Restated 2015 Plan from 16,000,000 shares of Class A Common Stock to an aggregate of 21,000,000 shares of Class A Common Stock.

The amendment is subject to the approval of the Company’s shareholders at the Annual Meeting on June 5, 2020.

Amended and Restated Investment Technology Group, Inc.

6 unchanged sentences

(“Aranda”), an affiliate of Temasek Holdings (Private) Limited (“Temasek”), for an aggregate purchase price of approximately $ 125.0 million and 40,064,103 shares of the Company’s Class A Common Stock to North Island Holdings I, LP (the “North Island Stockholder”) for an aggregate purchase price of approximately $ 618.7 million, in each case in accordance with terms of an investment agreement in a private placement exempt from the registration requirements of the Securities Act of 1933, as amended (the “Securities Act”), pursuant to Section 4(a)(2) of the Securities Act.

The investment agreements are filed as exhibits to the Company’s 2019 Annual Report on Form 10-K filed with the Securities and Exchange Commission on February 28, 2020.

The investment agreements were filed as exhibits to the Company’s 2019 Annual Report on Form 10-K filed with the Securities and Exchange Commission on February 28, 2020.

Secondary Offerings

9 unchanged sentences

Employee Exchanges

During the three months ended March 31, 2020 and 2019 , pursuant to the exchange agreement by and among the Company, Virtu Financial and holders of Virtu Financial Units, certain current and former employees elected to exchange 724,327 and 240,000 units, respectively in Virtu Financial held directly or on their behalf by Virtu Employee Holdco LLC (“Employee Holdco”) on a one -for-one basis for shares of Class A Common Stock.

As a result of the completion of the IPO, the Reorganization Transactions, the Secondary Offerings, employee exchanges, and the share issuance in connection with the Acquisition of KCG, the Company holds approximately a 63.2 % interest in Virtu Financial at March 31, 2020 .

During the six months ended June 30, 2020 and 2019, pursuant to the exchange agreement by and among the Company, Virtu Financial and holders of Virtu Financial Units, certain current and former employees elected to exchange 2,360,239 and 609,984 units, respectively in Virtu Financial held directly or on their behalf by Virtu Employee Holdco LLC (“Employee Holdco”) on a one -for-one basis for shares of Class A Common Stock.

As a result of the completion of the IPO, the Reorganization Transactions, the Secondary Offerings, employee exchanges, and the share issuance in connection with the Acquisition of KCG, the Company holds approximately a 64.1 % interest in Virtu Financial at June 30, 2020.

Warrant Issuance

1 unchanged sentence

Pursuant to the Warrant, the Founder Member may purchase up to 3,000,000 shares of Class A Common Stock, which number of shares will be increased to 10,000,000 if, at any time during the term of the Founder Member Facility, Founder Member Loans equal to or greater than $ 100 million remain outstanding for a certain period of time specified in the Warrant.

The exercise price per share of the Class A Common Stock issuable pursuant to the Warrant shall be equal to the average of the volume weighted average prices of the Class A Common Stock for the ten ( 10 ) trading days following May 7, 2020, the date on which the Company publicly announced its earnings results for the first quarter of 2020.

The exercise price per share of the Class A Common Stock issuable pursuant to the Warrant is $22.98, which in accordance with the terms of the Warrant, is equal to the average of the volume weighted average prices of the Class A Common Stock for the ten ( 10 ) trading days following May 7, 2020, the date on which the Company publicly announced its earnings results for the first quarter of 2020.

The Warrant may be exercised on or after May 22, 2020, the eleventh (11th) trading day following the date on which the Company publicly announced its earnings results for the first quarter of 2020, up to and including January 15, 2022.

The Warrant and Class A Common Stock issuable pursuant to the Warrant were offered, and will be issued and sold, in reliance on the exemption from the registration requirements of the Securities Act, set forth under Section 4(a)(2) of the Securities Act relating to sales by an issuer not involving any public offering.

The foregoing description of the Warrant does not purport to be complete and is qualified in its entirety by reference to

the complete text of the Warrant, which is filed as an exhibit hereto.

The fair value of the Warrant was determined using a Black-Scholes-Merton model, and was recorded as a debt issuance cost within Short-term borrowings on the Condensed Consolidated Statement of Financial Condition and as an increase to Additional paid-in capital on the Condensed Consolidated Statement of Changes in Equity.

The foregoing description of the Warrant does not purport to be complete and is qualified in its entirety by reference to the complete text of the Warrant, which was filed as an exhibit to the Company's 2020 quarterly report on Form 10-Q for the period ended March 31, 2020 filed with the Securities and Exchange Commission on May 11, 2020.

The fair value of the Warrant was determined using a Black-Scholes-Merton model, and was recorded as a debt issuance cost within Other Assets on the Condensed Consolidated Statement of Financial Condition and as an increase to Additional paid-in capital on the Condensed Consolidated Statement of Changes in Equity.

The balance will be amortized on a straight-line basis from March 20, 2020 through September 20, 2020, the date on which the Founder Member Loan Facility expires, and recorded as expense within Debt issue cost related to debt refinancing, prepayment and commitment fees in the Condensed Consolidated Statement of Comprehensive Income.

Accumulated Other Comprehensive Income (Loss)

The following table presents the changes in Other Comprehensive Income (Loss) for the three months ended March 31, 2020 and 2019 :

(in thousands)

Three Months Ended March 31, 2020

AOCI Beginning Balance

The following table presents the changes in Other Comprehensive Income (Loss) for the three and six months ended June 30, 2020 and 2019:

Three Months Ended June 30, 2020

(in thousands) AOCI Beginning Balance Amounts

reclassified from

AOCI to income

Amounts recorded

AOCI Ending Balance

AOCI to income Amounts recorded

in AOCI AOCI Ending Balance

Net change in unrealized cash flow hedges gains (losses) (1) $ ( 31,468 ) $ 3,581 $ ( 8,823 ) $ ( 36,710 )

Foreign exchange translation adjustment ( 6,531 ) — 3,674 ( 2,857 )

Total $ ( 37,999 ) $ 3,581 $ ( 5,149 ) $ ( 39,567 )

(1) Amounts reclassified from AOCI to income are included within Financing interest expense on long-term borrowings on the Condensed Consolidated Statements of Comprehensive Income

(in thousands)

Three Months Ended March 31, 2019

AOCI Beginning Balance

Six Months Ended June 30, 2020

(in thousands) AOCI Beginning Balance Amounts

reclassified from

AOCI to income

Amounts recorded

AOCI Ending Balance

AOCI to income Amounts recorded

in AOCI AOCI Ending Balance

Net change in unrealized cash flow hedges gains (losses) $ — $ 3,898 $ ( 40,608 ) $ ( 36,710 )

Foreign exchange translation adjustment ( 647 ) — ( 2,210 ) ( 2,857 )

Total $ ( 647 ) $ 3,898 $ ( 42,818 ) $ ( 39,567 )

(1) Amounts reclassified from AOCI to income are included within Financing interest expense on long-term borrowings on the Condensed Consolidated Statements of Comprehensive Income

Three Months Ended June 30, 2019

(in thousands) AOCI Beginning Balance Amounts

reclassified from

AOCI to income Amounts recorded

in AOCI AOCI Ending Balance

Foreign exchange translation adjustment $ ( 2,218 ) $ — $ 548 $ ( 1,670 )

Total $ ( 2,218 ) $ — $ 548 $ ( 1,670 )

Six Months Ended June 30, 2019

(in thousands) AOCI Beginning Balance Amounts

reclassified from

AOCI to income Amounts recorded

in AOCI AOCI Ending Balance

Foreign exchange translation adjustment $ ( 82 ) $ — $ ( 1,588 ) $ ( 1,670 )

Total $ ( 82 ) $ — $ ( 1,588 ) $ ( 1,670 )

Share-based Compensation

Pursuant to the Amended and Restated 2015 Management Incentive Plan as described in Note 17 “Capital Structure”, and in connection with the IPO, non-qualified stock options to purchase shares of Class A Common Stock were granted, each of which vests in equal annual installments over a period of four years from grant date and expires not later than 10 years from the date of grant.

The following table summarizes activity related to stock options for the three months ended March 31, 2020 and 2019 :

Options Outstanding

Options Exercisable

Number of Options

Weighted Average Exercise Price Per Share

Weighted Average Remaining Contractual Life

Number of Options

Weighted Average Exercise Price

The following table summarizes activity related to stock options for the six months ended June 30, 2020 and 2019:

Options Outstanding Options Exercisable

Number of Options Weighted Average Exercise Price Per Share Weighted Average Remaining Contractual Life Number of Options Weighted Average Exercise Price

At December 31, 2018 3,486,150 $ 19.00 6.30 1,660,400 $ 19.00

Granted 156,129 13.60 4.87 156,129 13.60

Exercised ( 353,500 ) 19.00 — ( 353,500 ) 19.00

Forfeited or expired ( 40,000 ) — — — —

At March 31, 2019

At June 30, 2019 3,248,779 $ 18.74 5.74 3,248,779 $ 18.74

At December 31, 2019 3,233,779 $ 18.74 5.24 3,233,779 $ 18.74

Granted — — — — —

Exercised ( 617,923 ) 17.64 — ( 617,923 ) 17.64

Forfeited or expired — — — — —

At March 31, 2020

At June 30, 2020 2,615,856 $ 19.00 4.74 2,615,856 $ 19.00

The expected life has been determined based on an average of vesting and contractual period.

3 unchanged sentences

The expected dividend yield was determined based on estimated future dividend payments divided by the IPO stock price.

The Company recognized $ 1.4 million for the three months ended March 31, 2019 of compensation expense in relation to the stock options issued and outstanding.

As of March 31, 2020 the stock options to purchase shares of Class A Common Stock were fully vested.

The Company recognized $ 1.4 million for the six months ended June 30, 2019 of compensation expense in relation to the stock options issued and outstanding.

The stock options to purchase shares of Class A Common Stock were fully vested in 2019, and as such there was no compensation expense recognized in relation to stock options for the three and six months ended June 30, 2020.

Amended and Restated Investment Technology Group, Inc.

4 unchanged sentences

The Company filed a Registration Statement on Form S-8 on the ITG Closing Date to register such shares of Class A Common Stock.

Class A Common Stock and Restricted Stock Units

Pursuant to the Amended and Restated 2015 Management Incentive Plan as described in Note 17 “Capital Structure” , subsequent to the IPO, shares of immediately vested Class A Common Stock and restricted stock units were granted, with the latter vesting over a period of up to 4 years .

The fair value of the Class A Common Stock and RSUs was determined based on a volume weighted average price and is being recognized on a straight-line basis over the vesting period.

For the three months ended March 31, 2020 and 2019 , respectively, there were 852,599 and 423,393 shares of immediately vested Class A Common Stock granted as part of year-end compensation.

In addition, the Company accrued compensation expense of $ 17.1 million and $ 2.7 million for the three months ended March 31, 2020 and 2019 , respectively, related to immediately vested Class A Common Stock expected to be awarded as part of year-end incentive compensation, which was included in Employee compensation and payroll taxes on the Condensed Consolidated Statements of Comprehensive Income and Accounts payable, accrued expenses and other liabilities on the Condensed Consolidated Statements of Financial Condition.

The following table summarizes activity related to the RSUs (including the Assumed Awards):

Number of Shares

Class A Common Stock, Restricted Stock Units and Restricted Stock Awards

Pursuant to the Amended and Restated 2015 Management Incentive Plan as described in Note 17 “Capital Structure”, subsequent to the IPO, shares of immediately vested Class A Common Stock, restricted stock units ("RSUs") and restricted stock awards ("RSAs") were granted, with RSUs and RSAs vesting over a period of up to 4 years.

The fair value of the Class A Common Stock and RSUs was determined based on a volume weighted average price and the expense is recognized on a straight-line basis over the vesting period.

The fair value of the RSAs was determined based on the closing price as of the date of grant and the expense is recognized from the date that achievement of the performance target becomes probable through the remainder of the vesting period.

Performance targets are based on the Company's adjusted EBITDA for certain future periods.

For the six months ended June 30, 2020 and 2019, respectively, there were 852,599 and 423,393 shares of immediately vested Class A Common Stock granted as part of year-end compensation.

In addition, the Company accrued compensation expense of $ 25.8 million and $ 2.5 million for the six months ended June 30, 2020 and 2019, respectively, related to immediately vested Class A Common Stock expected to be awarded as part of year-end incentive compensation, which was included in Employee compensation and payroll taxes on the Condensed Consolidated Statements of Comprehensive Income and Accounts payable, accrued expenses and other liabilities on the Condensed Consolidated Statements of Financial Condition.

The following table summarizes activity related to the RSUs (including the Assumed Awards) and RSAs:

Number of RSUs and RSAs Weighted

Average Fair Value

At December 31, 2018 1,378,922 $ 20.03

At March 31, 2019

Granted 3,305,045 25.76

Forfeited ( 189,149 ) 20.97

Vested ( 820,287 ) 23.81

At June 30, 2019 3,674,531 $ 24.29

At December 31, 2019 2,993,489 $ 24.10

At March 31, 2020

The Company recognized $ 9.0 million and $ 5.0 million for the three months ended March 31, 2020 and 2019 , respectively, of compensation expense in relation to the restricted stock units.

As of March 31, 2020 and December 31, 2019 , total unrecognized share-based compensation expense related to unvested RSUs was $ 67.9 million and $ 43.4 million , respectively, and this amount is to be recognized over a weighted average period of 1.6 and 2.0 years , respectively.

Granted (1) 3,039,940 16.76

Forfeited ( 164,476 ) 18.59

Vested ( 1,889,862 ) 20.57

At June 30, 2020 3,979,091 $ 20.39

(1) Excluded in the number of RSUs and RSAs is 400,000 participating RSAs where the grant date has not been achieved because the performance conditions have not been met.

The Company recognized $ 7.8 million and $ 16.4 million for the three months ended June 30, 2020 and 2019 and $ 16.8 million and $ 39.6 million for the six months ended June 30, 2020 and 2019, respectively, of compensation expense in relation to the RSUs.

As of June 30, 2020 and December 31, 2019, total unrecognized share-based compensation expense related to unvested RSUs was $ 58.4 million and $ 43.4 million, respectively, and this amount is to be recognized over a weighted average period of 1.37 and 2.0 years, respectively.

Awards in which the specific performance conditions have not been met are not included in unrecognized share-based compensation expense.

Regulatory Requirement

As of March 31, 2020 and December 31, 2019 , U.S.

broker-dealer subsidiaries of the Company are subject to the SEC Uniform Net Capital Rule 15c3-1, which requires the maintenance of minimum net capital for each of the U.S.

broker-dealers as detailed in the table below.

Pursuant to NYSE rules, VAL was also required to maintain $ 1.0 million of capital in connection with the operation of its designated market maker (“DMM”) business as of March 31, 2020 .

Pursuant to NYSE rules, VAL was also required to maintain $ 1.0 million of capital in connection with the operation of its designated market maker (“DMM”) business as of June 30, 2020.

The required amount is determined under the exchange rules as the greater of (i) $ 1 million or (ii) $ 75,000 for every 0.1 % of NYSE transaction dollar volume in each of the securities for which the Company is registered as the DMM.

The regulatory capital and regulatory capital requirements of the U.S broker-dealer subsidiaries as of March 31, 2020 were as follows:

(in thousands)

Regulatory Capital

Regulatory Capital Requirement

Excess Regulatory Capital

The regulatory capital and regulatory capital requirements of the U.S broker-dealer subsidiaries as of June 30, 2020 were as follows:

(in thousands) Regulatory Capital Regulatory Capital Requirement Excess Regulatory Capital

Virtu Americas LLC $ 567,577 $ 5,290 $ 562,287

1 unchanged sentence

Virtu Alternet Securities LLC 2,357 100 2,257

As of March 31, 2020 , VAL and VITG had $ 47.3 million and $ 19.4 million , respectively, of cash in special reserve bank accounts for the benefit of customers pursuant to SEC Rule 15c3-3, Computation for Determination of Reserve Requirements, and $ 8.2 million and $ 15.0 million , respectively, of cash in reserve bank accounts for the benefit of proprietary accounts of brokers.

As of June 30, 2020, VAL had $ 44.5 million of cash in special reserve bank accounts for the benefit of customers pursuant to SEC Rule 15c3-3, Computation for Determination of Reserve Requirements, and $ 28.8 million of cash in reserve bank accounts for the benefit of proprietary accounts of brokers.

Balances in special reserve bank accounts previously maintained by VITG were moved to VAL upon consolidation of the broker dealers.

The balances are included within Cash restricted or segregated under regulations and other on the Condensed Consolidated Statement of Financial Condition.

1 unchanged sentence

broker-dealer subsidiaries as of December 31, 2019 were as follows:

(in thousands)

Regulatory Capital

Regulatory Capital Requirement

Excess Regulatory Capital

(in thousands) Regulatory Capital Regulatory Capital Requirement Excess Regulatory Capital

Virtu Americas LLC $ 257,452 $ 2,571 $ 254,881

7 unchanged sentences

Virtu Financial Canada ULC was admitted to membership in IIROC in March 2019.

The regulatory net capital balances and regulatory capital requirements applicable to the Company's foreign subsidiaries as of March 31, 2020 were as follows:

(in thousands)

Regulatory Capital

Regulatory Capital Requirement

Excess Regulatory Capital

The regulatory net capital balances and regulatory capital requirements applicable to the Company's foreign subsidiaries as of June 30, 2020 were as follows:

(in thousands) Regulatory Capital Regulatory Capital Requirement Excess Regulatory Capital

Virtu ITG Canada Corp $ 15,014 $ 184 $ 14,830

9 unchanged sentences

(1) Preliminary

As of March 31, 2020 , Virtu ITG Europe Limited and Virtu ITG Canada Corp had $ 4.1 million and $ 0.4 million , respectively, of funds on deposit for trade clearing and settlement activity, and Virtu ITG Hong Kong Ltd had $ 30 thousand of segregated balances under a collateral account control agreement for the benefit of certain customers.

As of June 30, 2020, Virtu ITG Europe Limited and Virtu ITG Canada Corp had $ 3.1 million and $ 0.4 million, respectively, of funds on deposit for trade clearing and settlement activity, and Virtu ITG Hong Kong Ltd had $ 30 thousand of segregated balances under a collateral account control agreement for the benefit of certain customers.

The regulatory net capital balances and regulatory capital requirements applicable to the Company's foreign subsidiaries as of December 31, 2019 were as follows:

(in thousands)

Regulatory Capital

Regulatory Capital Requirement

Excess Regulatory Capital

(in thousands) Regulatory Capital Regulatory Capital Requirement Excess Regulatory Capital

Virtu ITG Canada Corp $ 13,029 $ 193 $ 12,836

16 unchanged sentences

The revenues are attributed to countries based on the locations of the subsidiaries.

The following table presents total revenues by geographic area for the three months ended March 31, 2020 and 2019 :

Three Months Ended March 31,

The following table presents total revenues by geographic area for the three and six months ended June 30, 2020 and 2019 :

Three Months Ended June 30, Six Months Ended June 30,

(in thousands) 2020 2019 2020 2019

United States $ 767,707 $ 270,719 $ 1,560,733 $ 559,495

Ireland 64,554 48,890 172,464 84,565

Singapore 46,818 29,707 113,862 56,545

Canada 15,107 15,088 32,064 20,300

Australia 10,200 10,591 22,078 13,893

United Kingdom 504 ( 817 ) 2,980 ( 533 )

Others 1,013 923 2,343 1,268

Total revenues $ 905,903 $ 375,101 $ 1,906,524 $ 735,533

7 unchanged sentences

As a complement to electronic market making, the cash trading business handles specialized orders and also transacts on the OTC Link ATS operated by OTC Markets Group Inc.

The Execution Services segment comprises client-based trading and trading venues, offering execution services in global equities, options, futures and fixed income on behalf of institutions, banks and broker-dealers as well as technology services revenues.

The Company earns commissions and commission equivalents as an agent on behalf of clients as well as between principals to transactions;

8 unchanged sentences

Segment assets and liabilities are not used for evaluating segment performance or in deciding how to allocate resources to segments.

The Company’s total revenues and income before income taxes and noncontrolling interest (“Pre-tax earnings”) by segment for the three months ended March 31, 2020 and 2019 are summarized in the following table:

(in thousands)

The Company’s total revenues and income before income taxes and noncontrolling interest (“Pre-tax earnings”) by segment for the three months ended June 30, 2020 and 2019 are summarized in the following table:

(in thousands) Market

Making Execution

Services Corporate Consolidated

Total revenue $ 759,117 $ 148,076 $ ( 1,290 ) $ 905,903

2 unchanged sentences

Income (loss) before income taxes and noncontrolling interest 21,962 ( 21,697 ) ( 66,844 ) ( 66,579 )

The Company's Pre-tax earnings by segment for the six months ended June 30, 2020 and 2019 are summarized in the following table:

(in thousands) Market

Making Execution

Services Corporate Consolidated

Total revenue $ 1,589,703 $ 317,941 $ ( 1,120 ) $ 1,906,524

Income before income taxes and noncontrolling interest 849,142 35,850 ( 14,232 ) 870,760

Total revenue 512,274 224,520 ( 1,261 ) 735,533

Income (loss) before income taxes and noncontrolling interest 69,501 ( 66,102 ) ( 86,182 ) ( 82,783 )

Related Party Transactions

The Company incurs expenses and maintains balances with its affiliates in the ordinary course of business.

As of March 31, 2020 , and December 31, 2019 the Company had net receivables from its affiliates of $ 0.2 million and $ 1.3 million , respectively.

As of June 30, 2020, and December 31, 2019 the Company had net receivables from its affiliates of $ 1.6 million and $ 1.3 million, respectively.

The Company has held a minority interest in SBI since 2016 (see Note 10 “Financial Assets and Liabilities”).

The Company pays exchange fees to SBI for the trading activities conducted on its proprietary trading system.

The Company paid $ 3.6 million and $ 3.4 million for the three months ended March 31, 2020 and 2019 , respectively, to SBI for these trading activities.

The Company paid $ 6.0 million and $ 2.7 million for the three months ended June 30, 2020 and 2019, respectively, and $ 9.7 million and $ 6.1 million for the six months ended June 30, 2020 and 2019, respectively, to SBI for these trading activities.

The Company makes payments to two JVs (see Note 2 “Summary of Significant Accounting Policies”) to fund the construction of the microwave communication networks, and to purchase microwave communication networks, which are recorded within Communications and data processing on the Condensed Consolidated Statements of Comprehensive Income.

The Company made payments of $ 4.7 million and $ 5.2 million to the JVs for the three months ended March 31, 2020 and 2019 , respectively.

The Company made payments of $ 4.7 million and $ 5.2 million for the three months ended June 30, 2020 and 2019, respectively, and $ 9.4 million and $ 10.4 million to the JVs for the six months ended June 30, 2020 and 2019, respectively.

The Company purchases network connections services from affiliates of Level 3 Communications (“Level 3”).

Temasek and its affiliates have a significant ownership interest in Level 3.

The Company paid $ 0.4 million and $ 0.3 million for the three months ended March 31, 2020 and 2019 , respectively, to Level 3 for these services.

The Company paid $ 0.3 million and $ 0.5 million for the three months ended June 30, 2020 and 2019, respectively, and $ 0.8 million and $ 0.8 million for the six months ended June 30, 2020 and 2019, respectively, to Level 3 for these services.

The Company makes commission-sharing arrangement ("CSA") payments to affiliates of DBS Group Holdings ("DBS").

Temasek and its affiliates have a significant ownership interest in DBS.

The Company made payments of $ 0.2 million for the three and six months ended June 30, 2020.

As described in Note 9 “Borrowings” and Note 17 “Capital Structure”, on March 20, 2020 a subsidiary of the Company entered into an agreement with the Founder Member to establish the Founder Member Facility and, upon the execution of the Founder Member Facility and in consideration of the Founder Member’s commitments thereunder, the Company delivered to the Founder Member the Warrant.

2 unchanged sentences

The Company has evaluated subsequent events for adjustment to or disclosure in its condensed consolidated financial statements through the date of this report, and has not identified any recordable or disclosable events, not otherwise reported in these condensed consolidated financial statements or the notes thereto, except for the following:

On May 7, 2020, the Company’s board of directors declared a dividend of $ 0.24 per share of Class A Common Stock and Class B Common Stock and per participating Restricted Stock Unit that will be paid on June 15, 2020 to holders of record as of June 1, 2020.

shares of Class A Common Stock to an aggregate of 21,000,000 shares of Class A Common Stock.

The amendment is subject to the approval of the Company’s shareholders at the Annual Meeting on June 5, 2020.

On July 29, 2020, the Company amended the terms of its Committed Broker Dealer Facility to increase the sublimit applicable to Borrowing Base B borrowings up to $ 200 million.

On August 4, 2020, the Company completed the disposition of the MatchNOW business pursuant to a previously announced agreement with Cboe Global Markets, Inc., resulting in a gain of approximately $ 56.6 million, with potential additional benefit of up to approximately $ 23.0 million, conditioned on future performance of MatchNOW.

On August 7, 2020, the Company’s board of directors declared a dividend of $ 0.24 per share of Class A Common Stock and Class B Common Stock and per participating Restricted Stock Unit and Restricted Stock Award that will be paid on September 15, 2020 to holders of record as of September 1, 2020.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements