What changed in this filing

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Item 1. Financial Statements

2020-11-06 compared with 2020-08-07 · 292 added, 247 removed, 1432 unchanged (27% of the section changed)

9 unchanged sentences

Condensed Consolidated Statements of Financial Condition (Unaudited)

(in thousands, except share data) June 30,

(in thousands, except share data) September 30,

2020 December 31,

8 unchanged sentences

Receivables from customers 176,939 103,531

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)

Property, equipment and capitalized software (net of accumulated depreciation of $ 443,770 and $ 457,229 as of September 30, 2020 and December 31, 2019, respectively)

116,550 116,089

1 unchanged sentence

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)

Intangibles (net of accumulated amortization of $ 165,417 and $ 219,239 as of September 30, 2020 and December 31, 2019, respectively)

473,317 529,638

Deferred tax assets 192,467 214,671

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

Other assets ($ 66,805 and $ 48,966 , at fair value, as of September 30, 2020 and December 31, 2019, respectively)

339,161 252,640

16 unchanged sentences

Stockholders' equity

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

Class A common stock (par value $ 0.00001 ), Authorized — 1,000,000,000 and 1,000,000,000 shares, Issued — 125,059,325 and 120,435,912 shares, Outstanding — 122,880,554 and 118,257,141 shares at September 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 September 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 — 10,466,939 and 12,887,178 shares at September 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 September 30, 2020 and December 31, 2019, respectively

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

( 55,005 ) ( 55,005 )

4 unchanged sentences

stockholders' equity 1,396,760 931,374

Noncontrolling interest 406,727 297,562

Virtu Financial, Inc.

1 unchanged sentence

Condensed Consolidated Statements of Financial Condition (Unaudited)

(in thousands, except share data) June 30,

(in thousands, except share data) September 30,

2020 December 31,

Noncontrolling interest 410,047 297,562

Total equity 1,806,807 1,228,936

5 unchanged sentences

Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

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

39 unchanged sentences

Condensed Consolidated Statements of Changes in Equity (Unaudited)

Three and Six Months Ended June 30, 2020 and 2019

Three and Nine Months Ended September 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.

4 unchanged sentences

Share based compensation 1,854,961 — — — — — — — 21,357 — — 21,357 — 21,357

Repurchase of Class C common stock — — — — — — — — — — — — — —

Treasury stock purchases ( 642,869 ) — — — — — — — — ( 9,801 ) — ( 9,801 ) — ( 9,801 )

11 unchanged sentences

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

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

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

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

6 unchanged sentences

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

Share based compensation 234,981 — — — — — — — 10,568 — — 10,568 — 10,568

Treasury stock purchases ( 79,570 ) — — — — — — — — ( 2,418 ) — ( 2,418 ) — ( 2,418 )

Stock options exercised 189,704 — — — — — — — 3,604 — — 3,604 — 3,604

Net income — — — — — — — — — 116,709 — 116,709 82,999 199,708

Foreign exchange translation adjustment — — — — — — — — — — 4,213 4,213 3,599 7,812

Net change in unrealized cash flow hedges gains (losses) — — — — — — — — — — 151 151 163 314

Distribution from Virtu Financial to non-controlling interest — — — — — — — — — — — — ( 83,441 ) ( 83,441 )

Dividends — — — — — — — — — ( 30,347 ) — ( 30,347 ) — ( 30,347 )

Issuance of common stock in connection with employee exchanges 60,000 — — — — — — — — — — — — —

2 unchanged sentences

Shares Amounts Shares Amounts Shares Amounts Shares Amounts Amounts

Repurchase of Virtu Financial Units and corresponding number of Class C common stock in connection with employee exchanges — — ( 60,000 ) — — — — — — — — — — —

Balance at September 30, 2020 125,059,325 $ 1 10,466,939 $ — 60,091,740 $ 1 ( 2,178,771 ) $ ( 55,005 ) $ 1,143,149 $ 343,817 $ ( 35,203 ) $ 1,396,760 $ 410,047 $ 1,806,807

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

Share based compensation 965,421 — — — — — — — 30,764 — — 30,764 — 30,764

Repurchase of Class C common stock — — — — — — — — — — — — — —

Treasury stock purchases ( 325,195 ) — — — — — — — — ( 8,805 ) — ( 8,805 ) — ( 8,805 )

10 unchanged sentences

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

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

Stock options exercised 35,120 — — — — — — — 72 — — 72 — 72

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

7 unchanged sentences

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

Share based compensation 227,579 — — — — — — — 12,536 — — 12,536 — 12,536

Treasury stock purchases ( 57,890 ) — — — — — — — — ( 1,167 ) — ( 1,167 ) — ( 1,167 )

Net income — — — — — — — — — ( 4,312 ) — ( 4,312 ) ( 872 ) ( 5,184 )

Foreign exchange translation adjustment — — — — — — — — — — ( 4,316 ) ( 4,316 ) ( 2,881 ) ( 7,197 )

Stockholders' Equity Non-Controlling Interest Total Equity

(in thousands, except share and interest data)

Shares Amounts Shares Amounts Shares Amounts Shares Amounts Amounts

Distribution from Virtu Financial to non-controlling interest — — — — — — — — — — — — ( 25,448 ) ( 25,448 )

Dividends — — — — — — — — — ( 28,692 ) — ( 28,692 ) — ( 28,692 )

Issuance of common stock in connection with employee exchanges 233,877 — — — — — — — — — — — — —

Repurchase of Virtu Financial Units and corresponding number of Class C common stock in connection with employee exchanges — — ( 233,877 ) — — — — — — — — — — —

Balance at September 30, 2019 119,894,982 $ 1 12,904,525 $ — 60,091,740 $ 1 ( 2,178,771 ) $ ( 55,005 ) $ 1,070,123 $ ( 40,120 ) $ ( 5,986 ) $ 969,014 $ 327,703 $ 1,296,717

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

2 unchanged sentences

Condensed Consolidated Statements of Cash Flows (Unaudited)

Six Months Ended June 30,

Nine Months Ended September 30,

(in thousands) 2020 2019

9 unchanged sentences

Deferred taxes 22,204 11,595

Gain on sale of MATCHNow ( 58,652 ) —

Other ( 14,750 ) ( 22,623 )

18 unchanged sentences

Acquisition of property and equipment ( 21,717 ) ( 17,101 )

Proceeds from sale of MATCHNow 60,592 —

ITG Acquisition, net of cash acquired, described in Note 3 — ( 835,581 )

16 unchanged sentences

Net increase (decrease) in cash and cash equivalents ( 107,318 ) ( 341,228 )

Nine Months Ended September 30,

(in thousands) 2020 2019

Cash, cash equivalents, and restricted or segregated cash, beginning of period 773,280 736,047

Cash, cash equivalents, and restricted or segregated cash, end of period $ 665,962 $ 394,819

Six Months Ended June 30,

(in thousands) 2020 2019

Supplementary disclosure of cash flow information

3 unchanged sentences

Share-based and accrued incentive compensation to developers relating to capitalized software 9,672 1,434

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

Non-cash financing activities

10 unchanged sentences

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

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

As of September 30, 2020, VFI owned approximately 64.2 % 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”).

12 unchanged sentences

Virtu Financial’s principal U.S.

subsidiaries include Virtu Americas LLC (“VAL”) and Virtu ITG LLC (“VITG”), which are U.S.

broker-dealers, and Virtu Alternet Securities LLC (“VALT”, collectively with VAL and VITG, the "broker-dealers").

As part of the Company's integration efforts, the Company has been in the process of consolidating its U.S.

broker-dealers.

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.

subsidiary is Virtu Americas LLC (“VAL”), which is a U.S.

broker-dealer.

As part of the Company's integration efforts, the Company consolidated the operations of its other historical U.S.

broker-dealer subsidiaries.

Specifically, the broker-dealer activities of Virtu Financial BD LLC ("VFBD") and Virtu Financial Capital Markets LLC ("VFCM") were consolidated within VAL as of December 31, 2019 and the SEC registrations were withdrawn in March 2020.

Subsequently, the Company consolidated the broker-dealer activities of Virtu ITG LLC ("VITG") and Virtu Alternet Securities ("VALT") within VAL as of June 1, 2020 and the SEC registrations were withdrawn in August 2020.

Other principal U.S.

12 unchanged sentences

Ltd., each formed in Singapore, all of which are trading entities focused on asset classes in their respective geographic regions.

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 $ 56.2 million, with contingent consideration of up to approximately $ 23.0 million, conditioned on future performance of MATCHNow.

See Note 4 "Sale of MATCHNow" for further details.

The Company has two operating segments:

6 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.

5 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.

Effective for the quarter ended June 30, 2020, 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.

For the three and nine months ended September 30, 2019, respectively, the Company reclassified $ 24.5 million and $ 71.7 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.

For the three and nine months ended September 30, 2019, respectively, the Company reclassified $ 3.0 million and $ 8.9 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.

2 unchanged sentences

All intercompany accounts and transactions have been eliminated in consolidation.

As discussed in Note 3 “ITG Acquisition”, the Company has accounted for the ITG Acquisition under the acquisition method of accounting.

Under the acquisition method of accounting, the assets and liabilities of ITG, as of the ITG Closing Date, were recorded at their respective fair values and added to the carrying value of the Company’s existing assets and liabilities.

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 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.

Summary of Significant Accounting Policies

59 unchanged sentences

Level 3 — Prices or valuations that require inputs that are both significant to the fair value measurement and unobservable.

Transfers in or out of levels are recognized based on the beginning fair value of the period in which they occurred.

Fair Value Option

51 unchanged sentences

Lease expense for operating leases and amortization of the finance lease ROU asset is recognized on a straight-line basis over the lease term.

Lease expense related to the leasing of corporate office space is recorded in Operations and Administrative expenses on the Condensed Consolidated Statement of Comprehensive Income.

Lease expense related to the leasing of data centers and other technology is recorded in Communication and Data Processing on the Condensed Consolidated Statement of Comprehensive Income.

Certain of the Company's lease agreements contain fixed lease payments that contain lease and non-lease components;

15 unchanged sentences

Trading Income, net

Trading income, net is comprised of changes in the fair value of trading assets and liabilities (i.e., unrealized gains and losses) and realized gains and losses on trading assets and liabilities.

Trading income, net is composed of changes in the fair value of trading assets and liabilities (i.e., unrealized gains and losses) and realized gains and losses on trading assets and liabilities.

Trading gains and losses on financial instruments owned and financial instruments sold, not yet purchased are recorded on the trade date and reported on a net basis in the Condensed Consolidated Statements of Comprehensive Income.

23 unchanged sentences

The Company's subsidiaries are subject to income taxes in the respective jurisdictions (including foreign jurisdictions) in which they operate.

The provision for income tax is comprised of current tax and deferred tax.

The provision for income tax comprises current tax and deferred tax.

Current tax represents the tax on current year tax returns, using tax rates enacted at the balance sheet date.

9 unchanged sentences

net income and other comprehensive income (“OCI”).

The Company’s OCI is comprised of foreign currency translation adjustments and mark-to-market gains and losses on the Company's derivative instruments designated as hedging instruments under ASC 815.

The Company’s OCI comprises foreign currency translation adjustments and mark-to-market gains and losses on the Company's derivative instruments designated as hedging instruments under ASC 815.

Assets and liabilities of operations having non-U.S.

11 unchanged sentences

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”), RSAs 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 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.

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

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

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

As of September 30, 2020, the Company held approximately a 14.1 % 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 June 30, 2020:

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

Carrying Amount Maximum Exposure to Loss VIEs' assets

22 unchanged sentences

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.

The Company adopted this ASU on January 1, 2020 using the modified retrospective method of adoption.

1 unchanged sentence

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 June 30, 2020

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

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

13 unchanged sentences

The Company is evaluating the impact of the ASU, but does not expect it to have a material impact on its Condensed Consolidated Financial Statements and related disclosures.

Convertible Instruments - In August 2020, the FASB issued ASU 2020-06, Debt - Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging - Contracts in Entity's Own Equity (Subtopic 815-40).

The ASU simplifies accounting for certain financial instruments with characteristics of liabilities and equity, including convertible instruments and contracts in an entity's own equity and updates selected EPS guidance.

The ASU is effective for periods beginning after December 15, 2021.

The Company is currently evaluating the impact of the new standard on its Condensed Consolidated Financial Statements and related disclosures.

ITG Acquisition

9 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 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.

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

Purchase price and goodwill

23 unchanged sentences

The Company recorded deferred tax assets of $ 17.6 million and deferred tax liabilities of $ 71.1 million with respect to recording ITG’s assets and liabilities under the purchase method of accounting as described above as well as recording the value of other tax attributes acquired as a result of the ITG Acquisition, as described in Note 14 “Income Taxes”.

Sale of MATCHNow

In May 2020, the Company entered into a Securities Purchase Agreement ("SPA") with Cboe Global Markets, Inc.

(“CBOE”) pursuant to which the Company agreed to sell 100 % of the outstanding interests in TriAct Canada Marketplace LP and TCM Corp., which operate an equities alternative trading system (“MATCHNow”) in Canada.

Pursuant to the terms of the SPA, the Company also agreed to enter into a licensing agreement for the licensing of certain software and intellectual property used in support of MATCHNow.

On August 4, 2020 (the "MATCHNow Closing Date"), the Company completed the sale of MATCHNow to CBOE for total gross proceeds of $ 60.6 million in cash, with additional contingent consideration of up to approximately $ 23.0 million.

The Company incurred one-time transaction costs including professional fees related to the sale of $ 2.5 million, which were recorded in Transaction advisory fees and expenses on the Condensed Consolidated Statement of Comprehensive Income.

The Company recognized a gain on sale of $ 56.2 million, which was recorded in Other, net on the Condensed Consolidated Statement of Comprehensive Income for the three and nine months ended September 30, 2020.

A summary of the carrying value of MATCHNow and gain on sale of MATCHNow is as follows:

(in thousands)

Total sale proceeds received $ 60,592

Total carrying value of MATCHNow as of MATCHNow Closing Date ( 1,940 )

Gain on sale of MATCHNow 58,652

Transaction costs ( 2,453 )

Gain on sale of MATCHNow, net of transaction costs $ 56,199

Contingent consideration will be earned based on the future performance of MATCHNow following the Closing Date.

Deferred payments will be assessed quarterly until December 31, 2022 and recorded in Other, net on the Condensed Consolidated Statement of Comprehensive Income when the contingency is resolved and payments become payable by CBOE.

In addition, the Company entered into a Transition Services Agreement ("TSA") with CBOE, pursuant to which the Company agreed to provide certain telecom and general and administrative services for a defined period.

Income from performing services under the TSA will be recorded in Other, net on the Condensed Consolidated Statement of Comprehensive Income.

With the licensing of certain software and intellectual property associated with MATCHNow, the Company performed an assessment of impairment of long-lived intangible assets acquired in connection with the ITG acquisition, of which MATCHNow technology was a component.

No impairment was recognized for the three and nine months ended September 30, 2020.

Earnings per Share

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

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

Three Months Ended September 30, Nine Months Ended September 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 June 30, Six Months Ended June 30,

Three Months Ended September 30, Nine Months Ended September 30,

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

6 unchanged sentences

Basic earnings (loss) per share $ 0.92 $ ( 0.04 ) $ 4.31 $ ( 0.38 )

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

Three Months Ended September 30, Nine Months Ended September 30,

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

3 unchanged sentences

Issued and outstanding 122,686,931 117,548,769 121,328,895 112,602,934

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 —

Issuable pursuant to Amended and Restated 2015 Management Incentive Plan, Amended and Restated Investment Technology Group, Inc.

2007 Omnibus Equity Compensation Plan, and Warrants issued in connection with the Founder Member Loan (1) 1,085,074 — 610,944 —

123,772,005 117,548,769 121,939,839 112,602,934

Diluted earnings (loss) per share $ 0.92 $ ( 0.04 ) $ 4.29 $ ( 0.38 )

(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.

(1) The dilutive impact excludes from the computation of earnings (loss) per share for the three and nine months ended September 30, 2019, respectively, 205,683 and 574,047 unexercised stock options and 221,837 and 264,866 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.

2 unchanged sentences

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 June 30, 2020 and December 31, 2019, respectively.

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 September 30, 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.

5 unchanged sentences

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.

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.

As a result of the reduction in the U.S.

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 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.

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 18 “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 during the year ended December 31, 2018.

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 18 “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 during the year ended December 31, 2019.

At September 30, 2020 and December 31, 2019, the Company’s remaining deferred tax assets that relate to the matters described above were approximately $ 184.2 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 September 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 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:

As of September 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 nine months ended September 30, 2020 or 2019.

The following table presents the details of goodwill by segment as of September 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 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

As of September 30, 2020 and December 31, 2019, the Company's total amount of intangible assets recorded was $ 473.3 million and $ 529.6 million, respectively.

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

As of September 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

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

Customer relationships 486,600 ( 82,338 ) 404,262 10 to 12

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

Technology 136,000 ( 76,838 ) 59,162 1 to 6

Favorable occupancy leases 5,895 ( 2,641 ) 3,254 3 to 15

Exchange memberships 4,739 — 4,739 Indefinite

Trade name 3,600 ( 1,900 ) 1,700 3

ETF issuer relationships 950 ( 850 ) 100 9

ETF buyer relationships 950 ( 850 ) 100 9

$ 638,734 $ ( 165,417 ) $ 473,317

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(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

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

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

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

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

Exchange memberships 4,882 — 4,882 Indefinite

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

ETF issuer relationships 950 ( 770 ) 180 9

ETF buyer relationships 950 ( 770 ) 180 9

$ 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.

Amortization expense relating to finite-lived intangible assets was approximately $ 18.3 million and $ 18.9 million for the three months ended September 30, 2020 and 2019, respectively, and $ 56.2 million and $ 50.4 million for the nine months ended September 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

(in thousands) September 30, 2020

Remainder of 2020 $ 18,076

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 June 30, 2020 and December 31, 2019:

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

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

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

Due from prime brokers $ 643,089 $ 418,059

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Net equity with futures commission merchants 207,213 267,748

Unsettled trades with clearing organization 701,596 214,618

Unsettled trades with clearing organizations 392,349 214,618

Securities failed to deliver 228,677 178,324

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Net equity with futures commission merchants 69,480 50,950

Unsettled trades with clearing organization 443,096 118,286

Unsettled trades with clearing organizations 178,361 118,286

Securities failed to receive 93,973 144,494

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Total payables to broker-dealers and clearing organizations $ 675,032 $ 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 $ 112.4 million and $ 134.3 million as of June 30, 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 10 “Borrowings”) of approximately $ 163.6 million and $ 134.3 million as of September 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 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

At September 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 September 30, 2020 and December 31, 2019 are summarized as follows:

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

Securities received as collateral:

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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 June 30, 2020 and December 31, 2019 consisted of the following:

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

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

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

Equities $ 599,350 $ 654,366

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

June 30, 2020

September 30, 2020

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

Broker-dealer credit facilities $ 78,000 $ ( 981 ) $ 77,019

Short-term bank loans 46,974 — 46,974

$ 124,974 $ ( 981 ) $ 123,993

December 31, 2019

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On March 20, 2020, VAL, a broker-dealer subsidiary of the Company, entered into a Loan Agreement (the “Founder Member Loan Facility”) with TJMT Holdings LLC (the “Founder Member”), as lender and administrative agent, providing for unsecured term loans from time to time (the “Founder Member Loans”) in an aggregate original principal amount not to exceed $ 300 million.

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 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 Loans were available to be borrowed in one or more borrowings on or after March 20, 2020 and prior to September 20, 2020 (the "Founder Member Loan Term").

The Founder Member Loan Facility Term expired as of September 20, 2020 without VAL having borrowed any Founder Member Loans at any time.

The Founder Member is an affiliate of Mr.

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Terms of the warrant are set forth in further detail in Note 18 “Capital Structure”.

The interest rate for the Founder Member Loans, to the extent drawn and outstanding, will be 8.0 % per annum, and the Founder Member Loans will be due on September 20, 2020.

If an event of default occurs and is continuing, the Lender may increase the interest rate 2.0 % above what would otherwise be applicable on overdue amounts, and declare all Founder Member Loans immediately due and payable.

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.

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

At June 30, 2020

At September 30, 2020

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

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Committed facility 1.41 % 600,000 — — —

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

$ 1,000,000 $ 78,000 $ ( 981 ) $ 77,019

(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

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

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

Three Months Ended September 30, Nine Months Ended September 30,

(in thousands) 2020 2019 2020 2019

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Demand Loan — — 211 —

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

$ 315 $ 465 $ 1,651 $ 1,081

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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 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 September 30, 2020, there was $ 47.0 million associated with international settlement activities outstanding under these facilities at a weighted average interest rate of approximately 2.0 %.

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.

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.

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

There was minimal interest expense in relation to this facility for the three months ended September 30, 2020 and $ 0.4 million for the nine months ended September 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 June 30, 2020

At September 30, 2020

(in thousands) Weighted Average

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(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 $ 1.8 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.

Interest expense in relation to the facilities was approximately $ 1.2 million and $ 1.6 million for the three months ended September 30, 2020 and 2019, respectively, and $ 3.8 million and $ 5.3 million for the nine months ended September 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 June 30, 2020

At September 30, 2020

(in thousands) Maturity

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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.

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During the year ended December 31, 2019, $ 100.0 million was repaid 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.

In August of 2020, an additional $ 100 million was repaid under this facility.

As of September 30, 2020, $ 1,637 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.

If an event of default occurs and is continuing, the lenders under the Amended Credit Agreement will be entitled to take various actions, including the acceleration of amounts outstanding under the Amended Credit Agreement and all actions permitted to be taken by a secured creditor in respect of the collateral securing the obligations under the Amended Credit Agreement.

To finance the Acquisition of KCG, on June 30, 2017, Virtu Financial and VFH previously entered into the Fourth Amended and Restated Credit Agreement which, upon the closing of the Acquisition of KCG, provided for an aggregate $ 1,150.00 million of first lien secured term loans (the “Existing Term Loan Facility”).

As described above, the Existing Term Loan Facility was fully terminated following its repayment in full with the proceeds of the First Lien Term Loan Facility.

The KCG Acquisition Term Loan Facility was fully terminated following its repayment in full with the proceeds of the First Lien Term Loan Facility described above.

Senior Secured Second Lien Notes

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

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

The principal balance was ¥ 3.5 billion ($ 33.2 million) as of September 30, 2020 and ¥ 3.5 billion ($ 32.2 million) as of December 31, 2019.

The Company recorded a loss of $ 0.8 million and a gain of $ 0.1 million during the three months ended September 30, 2020 and 2019, respectively, and a loss of $ 1.0 million and a loss of $ 0.5 million during the nine months ended September 30, 2020 and 2019, respectively, due to changes in foreign currency rates.

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

(in thousands) September 30, 2020

Thereafter 1,636,512

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Consequently, such financial instruments are classified as Level 2.

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

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

September 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

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1,156,043 2,288,764 — ( 654,672 ) 2,790,135

Payables to broker dealers and clearing organizations:

Interest rate swap — 69,355 — — 69,355

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

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

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;

As of September 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;

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

June 30, 2020

September 30, 2020

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

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

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

Three Months Ended September 30, 2020

(in thousands) Balance at June 30, 2020 Purchases Total Realized and Unrealized Gains / (Losses) (1) Net Transfers into (out of) Level 3 Settlement Balance at September 30, 2020 Change in Net Unrealized Gains / (Losses) on Investments still held at September 30, 2020

Other assets:

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Total $ 51,599 $ — $ 13,104 $ — $ — $ 64,703 $ 13,104

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

(1) Total realized and unrealized gains/(losses) includes gains and losses realized on the SBI Bonds (see Note 10 “Borrowings” for more details) due to fluctuations in currency rates as well as gains and losses recognized on changes in the fair value of the SBI Investment.

Three Months Ended September 30, 2019

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

Other assets:

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Total $ 46,351 $ — $ ( 71 ) $ — $ — $ 46,280 $ ( 71 )

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

Nine Months Ended September 30, 2020

(in thousands) Balance at December 31, 2019 Purchases Total Realized and Unrealized Gains / (Losses) (1) Net Transfers into (out of) Level 3 Settlement Balance at September 30, 2020 Change in Net Unrealized Gains / (Losses) on Investments still held at September 30, 2020

Other assets:

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Total $ 46,245 $ — $ 18,458 $ — $ — $ 64,703 $ 18,458

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

Nine Months Ended September 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 September 30, 2019 Change in Net Unrealized Gains / (Losses) on Investments still held at September 30, 2019

Other assets:

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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 June 30, 2020:

June 30, 2020

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

September 30, 2020

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

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Receivables from broker-dealers and clearing organizations 1,881,881 1,881,881 481,664 1,400,217 —

Receivables from customers $ 176,939 $ 176,939 $ — $ 176,939 $ —

Total Assets 4,068,038 4,068,038 1,147,626 2,920,412 —

4 unchanged sentences

Payables to broker-dealers and clearing organizations (1) 675,032 675,032 ( 1,804 ) 676,836 —

Payables to customers 141,980 141,980 — 141,980 —

Total Liabilities $ 3,750,618 $ 3,778,326 $ ( 1,804 ) $ 3,780,130 $ —

(1) Payables to broker-dealers and clearing organizations includes interest rate swap carried at fair value.

The table below summarizes financial assets and liabilities not carried at fair value on a recurring basis as of December 31, 2019:

19 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 June 30, 2020 and December 31, 2019:

June 30, 2020

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

September 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

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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:

June 30, 2020

September 30, 2020

Remaining Contractual Maturity

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Derivative Instruments

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

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

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

Derivatives Assets Financial Statements Location Fair Value Notional Fair Value Notional

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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.

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 and six months ended June 30, 2020 and 2019.

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

Three Months Ended September 30, Nine Months Ended September 30,

(in thousands) Financial Statements Location 2020 2019 2020 2019

3 unchanged sentences

Options Trading income, net 35,343 ( 8,735 ) 61,643 ( 3,737 )

Interest rate swap on term loan Other, net ( 1,417 ) — ( 1,417 ) —

$ 84,129 $ ( 79,909 ) $ 326,710 $ 35,657

2 unchanged sentences

(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 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.

The Company also previously entered into a five-year $ 525 million floating-to-fixed interest rate swap agreement in the fourth quarter of 2019.

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 nine months ended September 30, 2020.

Revenues from Contracts with Customers

33 unchanged sentences

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 and six months ended June 30, 2020 and 2019:

Three Months Ended June 30, 2020

Three Months Ended September 30, 2020

(in thousands) Market Making Execution Services Corporate Total

10 unchanged sentences

Total revenues $ 474,598 $ 182,680 $ ( 1,166 ) $ 656,112

Three Months Ended June 30, 2019

Three Months Ended September 30, 2019

(in thousands) Market Making Execution Services Corporate Total

10 unchanged sentences

Total revenues $ 249,802 $ 133,805 $ ( 1,267 ) $ 382,340

Six Months Ended June 30, 2020

Nine Months Ended September 30, 2020

(in thousands) Market Making Execution Services Corporate Total

10 unchanged sentences

Total revenues $ 2,064,300 $ 500,621 $ ( 2,286 ) $ 2,562,635

Six Months Ended June 30, 2019

Nine Months Ended September 30, 2019

(in thousands) Market Making Execution Services Corporate Total

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Remaining Performance Obligations and Revenue Recognized from Past Performance Obligations

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.

As of September 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 $ 0.6 million and $ 0.3 million of revenue related to performance obligations satisfied in previous period for the three months ended September 30, 2020 and 2019, respectively.

Contract Assets and Contract Liabilities

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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 $ 59.3 million and $ 53.6 million as of June 30, 2020 and December 31, 2019, respectively.

Receivables related to revenues from contracts with customers amounted to $ 54.0 million and $ 53.6 million as of September 30, 2020 and December 31, 2019, respectively.

The Company did not identify any contract assets.

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

There were no impairment losses on receivables as of September 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 $ 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.

Deferred revenue related to contracts with customers was $ 7.6 million and $ 8.6 million as of September 30, 2020 and December 31, 2019, respectively.

The Company recognized revenue of $ 8.6 million and $ 8.1 million for the three months ended September 30, 2020 and 2019, respectively, and $ 23.6 million and $ 23.1 million for the nine months ended September 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.

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taxation as partnerships.

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.

Accordingly, for the three and nine months ended September 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.

The Company’s provisions for (benefits from) income taxes and effective tax rates were $ 52.8 million, 20.9 %, and $( 0.6 ) million, and 9.9 % for the three months ended September 30, 2020 and 2019, respectively, and $ 200.0 million, 17.8 %, and $( 14.3 ) million, and 16.0 %, for the nine months ended September 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 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.

Included in Other assets on the Condensed Consolidated Statements of Financial Condition at September 30, 2020 and December 31, 2019 were current income tax receivables of $ 99.8 million and $ 39.3 million, respectively.

The balances at September 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 September 30, 2020 and December 31, 2019 were current tax liabilities of $ 33.8 million and $ 11.5 million, respectively.

The balances at September 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 6 “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.

There are no expiration dates on the deferred tax assets.

The provisions of ASC 740 require that carrying amounts of deferred tax assets be reduced by a valuation allowance if, based on the available evidence, it is more likely than not that some portion or all of the deferred tax assets will not be realized.

The provisions of ASC 740 require that carrying amounts of deferred tax assets be reduced by a valuation allowance if, based on the available evidence, it is more likely than not that some

portion or all of the deferred tax assets will not be realized.

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

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

At September 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.

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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.

net operating losses at September 30, 2020 and December 31, 2019 of $ 75.9 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 $ 15.2 million and $ 15.6 million was recorded against this deferred tax asset at September 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.

net operating losses at September 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 September 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 September 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 June 30, 2020, the Company’s tax years for 2013 through 2018 and 2010 through 2018 were subject to examination by U.S.

As of September 30, 2020, the Company’s tax years for 2013 through 2019 and 2010 through 2019 were subject to examination by U.S.

tax authorities, respectively.

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The final outcome of these examinations is not yet determinable.

However, the Company anticipates that adjustments related to these examinations, if any, will not result in a material change to the financial condition, results of operations and cash flows.

However, the Company anticipates that adjustments related to these examinations, if any, will not result in a material change to its financial condition, results of operations and cash flows.

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, respectively.

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.

The Company had $ 9.1 million of unrecognized tax benefits as of September 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 September 30, 2020.

Commitments, Contingencies and Guarantees

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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 defendants' response brief was filed August 13, 2020 and the plaintiffs' reply was filed September 17, 2020.

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

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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.

The Company has fully reserved for the monetary penalty as of September 30, 2020.

Representations and Warranties;

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Consistent with standard business practices in the normal course of business, the Company enters into contracts that contain a variety of representations and warranties and general indemnifications.

The Company has also provided general indemnifications to its managers, officers, directors, employees, and agents against expenses, legal fees, judgments, fines, settlements, and other amounts actually and reasonably incurred by such persons under certain circumstances as more fully disclosed in its operating agreement.

The Company has also provided general

indemnifications to its managers, officers, directors, employees, and agents against expenses, legal fees, judgments, fines, settlements, and other amounts actually and reasonably incurred by such persons under certain circumstances as more fully disclosed in its operating agreement.

The overall maximum amount of the obligations (if any) cannot reasonably be estimated as it will depend on the facts and circumstances that give rise to any future claims.

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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 Operations and administrative expense on the Condensed Consolidated Statement of Comprehensive Income.

The Company recognizes amounts received from subleases 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 June 30, 2020 December 31, 2019

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

Operating leases

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

June 30, 2020 December 31, 2019

September 30, 2020 December 31, 2019

Weighted average remaining lease term

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The components of lease expense were as follows:

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

Three Months Ended September 30, Nine Months Ended September 30,

(in thousands) 2020 2019 2020 2019

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Total Operating lease cost 20,914 22,174 61,947 86,129

Sublease income 4,399 3,024 11,994 8,939

Finance lease cost:

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Total Finance lease cost 2,765 3,442 9,177 9,854

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

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:

During the nine months ended September 30, 2019, the Company ceased use of certain office lease premises as part of its ongoing effort to consolidate office space.

For the three months ended September 30, 2019, the Company recognized $ 1.3 million in Termination of office leases on the condensed consolidated statement of comprehensive income related to these premises, comprised entirely of impairment of ROU assets.

For the nine months ended September 30, 2019, the Company recognized $ 66.5 million in Termination of office leases on the Condensed Consolidated Statement of Comprehensive Income related to these premises, comprising $ 27.0 million of impairments of ROU assets, $ 37.9 million of write-offs of leasehold improvements and fixed assets, and $ 1.5 million of dilapidation charges.

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

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

(in thousands) Operating Leases Finance Leases

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Total lease liability $ 365,364 $ 13,371

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) June 30,

2020 December 31, 2019

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) September 30, 2020 December 31, 2019

Cash and cash equivalents $ 567,677 $ 732,164

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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 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.

As of September 30, 2020 and December 31, 2019, there were 5,499,713 and 7,919,952 Virtu Financial Units outstanding held by Employee Holdco (as defined below), respectively, and 2,420,239 and 823,456 of such Virtu Financial Units and corresponding Class C Common Stock were exchanged into Class A Common Stock, forfeited or repurchased during the nine months ended September 30, 2020 and 2019, respectively.

Amended and Restated 2015 Management Incentive Plan

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Secondary Offerings

In May 2018, the Company and certain selling stockholders completed a public offering (the “May 2018 Secondary Offering”) of 17,250,000 shares of Class A Common Stock by the Company and certain selling stockholders at a purchase price per share of $ 27.16 (the offering price to the public of $ 28.00 per share minus the underwriters’ discount), which included the exercise in full by the underwriters of their option to purchase additional shares in the May 2018 Secondary Offering.

The Company sold 10,518,750 shares of Class A Common Stock in the offering, the net proceeds of which were used to purchase an equivalent number of Virtu Financial Units and corresponding shares of Class D Common Stock from TJMT Holdings LLC pursuant to that certain Member Purchase Agreement, entered into on May 15, 2018 by and between the Company and TJMT Holdings LLC.

The selling stockholders sold 6,731,250 shares of Class A Common Stock in the May 2018 Secondary Offering, including 2,081,250 shares of Class A Common Stock issued by the Company upon the exercise of vested stock options.

In connection with the May 2018 Secondary Offering, the Company, TJMT Holdings LLC, the North Island Stockholder, Havelock Fund Investments Pte.

(“Havelock”) and Aranda entered into that certain Amendment No.

1 to the Amended and Restated Registration Rights Agreement dated April 20, 2017, by and among the Company, TJMT Holdings LLC, the North Island Stockholder, Havelock, Aranda and certain direct or indirect equityholders of the Company (the “Amended and Restated Registration Rights Agreement”) to add Mr.

Vincent Viola and Mr.

Michael Viola, directors of the Company, and to confirm that certain other persons (including the Company’s CEO) remain parties to the Amended and Restated Registration Rights Agreement.

In May 2019, the Company completed a public offering (the “May 2019 Secondary Offering”) of 9,000,000 shares of Class A Common Stock at a purchase price per share paid by the underwriters of $ 22.00 , the proceeds of which were used to purchase an equivalent number of Virtu Financial Units and corresponding shares of Class D Common Stock from TJMT Holdings LLC pursuant to that certain Member Purchase Agreement, entered into on May 14, 2019 by and between the Company and TJMT Holdings LLC.

Employee Exchanges

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.

During the nine months ended September 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 2,420,239 and 823,456 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.

The Company holds approximately a 64.2 % interest in Virtu Financial at September 30, 2020.

Warrant Issuance

On March 20, 2020, in connection with and in consideration of the Founder Member’s commitments under the Founder Member Loan Facility (as described in Note 10 “Borrowings”), the Company delivered to the Founder Member a warrant (the “Warrant”) to purchase shares of the Company’s Class A Common Stock.

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.

Pursuant to the Warrant, the Founder Member may purchase up to 3,000,000 shares of Class A Common Stock.

If at any time during the term of the Founder Member Facility, the Founder Member Loans equal to or greater than $ 100 million had remained outstanding for a certain period of time specified in the Warrant, the number of shares would have increased to 10,000,000 .

The Founder Member Loan Facility Term expired on September 20, 2020 without the Company having borrowed any Founder Member Loans thereunder (as described in Note 10 "Borrowings"), and as a result no such increase in the number of shares which may be purchased has occurred or will occur pursuant to the terms of the Warrant.

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 may be exercised to purchase up to 3,000,000 shares of the Company's Class A Common Stock on any date after May 22, 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.

1 unchanged sentence

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.

The balance was amortized on a straight-line basis from March 20, 2020 through September 20, 2020, the date on which the Founder Member Loan Facility expired, 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 and six months ended June 30, 2020 and 2019:

Three Months Ended June 30, 2020

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

Three Months Ended September 30, 2020

(in thousands) AOCI Beginning Balance Amounts

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(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.

Six Months Ended June 30, 2020

As of September 30, 2020, the Company expects approximately $ 13.2 million to be reclassified from AOCI into earnings over the next 12 months.

The timing of the reclassification is based on the interest payment schedule of the long-term borrowings.

Nine Months Ended September 30, 2020

(in thousands) AOCI Beginning Balance Amounts

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(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

As of September 30, 2020, the Company expects approximately $ 13.2 million to be reclassified from AOCI into earnings over the next 12 months.

The timing of the reclassification is based on the interest payment schedule of the long-term borrowings.

Three Months Ended September 30, 2019

(in thousands) AOCI Beginning Balance Amounts

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Total $ ( 1,670 ) $ — $ ( 4,316 ) $ ( 5,986 )

Six Months Ended June 30, 2019

Nine Months Ended September 30, 2019

(in thousands) AOCI Beginning Balance Amounts

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Pursuant to the Amended and Restated 2015 Management Incentive Plan as described in Note 18 “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 six months ended June 30, 2020 and 2019:

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

Options Outstanding Options Exercisable

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

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

At September 30, 2019 3,248,779 $ 18.74 5.49 3,248,779 $ 18.74

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

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Forfeited or expired — — — — —

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

At September 30, 2020 2,426,152 $ 19.00 4.49 2,426,152 $ 19.00

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

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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 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.

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

Amended and Restated Investment Technology Group, Inc.

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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.

For the nine months ended September 30, 2020 and 2019, respectively, there were 967,526 and 423,393 shares of immediately vested Class A Common Stock granted as part of year-end compensation.

In addition, the Company reduced accrued compensation expense by $ 11.4 million for the three months ended September 30, 2020, increased accrued compensation $ 5.9 million for the three months ended September 30, 2019 and increased accrued compensation expense by $ 14.4 million and $ 8.4 million for the nine months ended September 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:

5 unchanged sentences

Vested ( 1,047,866 ) 24.08

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

At September 30, 2019 3,609,712 $ 23.75

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

2 unchanged sentences

Vested ( 2,124,843 ) 20.40

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

At September 30, 2020 3,778,317 $ 20.77

(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.

The Company recognized $ 9.0 million and $ 13.0 million for the three months ended September 30, 2020 and 2019 and $ 25.8 million and $ 52.6 million for the nine months ended September 30, 2020 and 2019, respectively, of compensation expense in relation to the RSUs.

As of September 30, 2020 and December 31, 2019, total unrecognized share-based compensation expense related to unvested RSUs was $ 50.6 million and $ 43.4 million, respectively, and this amount is to be recognized over a weighted average period of 1.18 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

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 June 30, 2020.

The Company's U.S.

broker-dealer subsidiary, VAL, is subject to the SEC Uniform Net Capital Rule 15c3-1, which requires the maintenance of minimum net capital 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 September 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 June 30, 2020 were as follows:

The regulatory capital and regulatory capital requirements of the Company's U.S broker-dealer subsidiary as of September 30, 2020 was as follows:

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

Virtu Americas LLC $ 641,314 $ 2,546 $ 638,768

Virtu ITG LLC 22,904 1,000 21,904

Virtu Alternet Securities LLC 2,357 100 2,257

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.

As of September 30, 2020, VAL had $ 64.9 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 $ 32.6 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.

12 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 June 30, 2020 were as follows:

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

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

Virtu ITG Canada Corp $ 12,252 $ 188 $ 12,064

TriAct Canada Marketplace LP 993 184 809

Virtu Financial Canada ULC 2,139 188 1,951

7 unchanged sentences

(1) Preliminary

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.

As of September 30, 2020, Virtu ITG Europe Limited and Virtu ITG Canada Corp had $ 0.2 million and $ 0.4 million, respectively, of segregated 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:

18 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 and six months ended June 30, 2020 and 2019 :

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

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

Three Months Ended September 30, Nine Months Ended September 30,

(in thousands) 2020 2019 2020 2019

21 unchanged sentences

(ii) institutional sales traders who offer portfolio trading and single stock sales trading which provides execution expertise for program, block and riskless principal trades in global equities and ETFs;

and (iii) matching of client conditional orders in POSIT Alert and client orders in the Company's ATSs, including Virtu MatchIt, POSIT, and MATCHNow.

and (iii) matching of client conditional orders in POSIT Alert and client orders in the Company's ATSs, including Virtu MatchIt, and POSIT.

The Execution Services segment also includes revenues derived from providing (a) proprietary risk management and trading infrastructure technology to select third parties for a service fee, (b) workflow technology, the Company’s integrated, broker-neutral trading tools delivered across the globe including trade order and execution management and order management software applications and network connectivity and (c) trading analytics, including (1) tools enabling portfolio managers and traders to improve pre-trade, real-time and post-trade execution performance, (2) portfolio construction and optimization decisions and (3) securities valuation.

2 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 June 30, 2020 and 2019 are summarized in the following table:

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

(in thousands) Market

5 unchanged sentences

Income (loss) before income taxes and noncontrolling interest 30,375 ( 29,202 ) ( 7,001 ) ( 5,828 )

The Company's Pre-tax earnings by segment for the six months ended June 30, 2020 and 2019 are summarized in the following table:

The Company's Pre-tax earnings by segment for the nine months ended September 30, 2020 and 2019 are summarized in the following table:

(in thousands) Market

7 unchanged sentences

The Company incurs expenses and maintains balances with its affiliates in the ordinary course of business.

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.

As of September 30, 2020, and December 31, 2019 the Company had net receivables from its affiliates of $ 2.9 million and $ 1.3 million, respectively.

The Company has held a minority interest in SBI since 2016 (see Note 11 “Financial Assets and Liabilities”).

The Company pays exchange fees to SBI for the trading activities conducted on its proprietary trading system.

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 paid $ 4.1 million and $ 4.0 million for the three months ended September 30, 2020 and 2019, respectively, and $ 13.8 million and $ 10.2 million for the nine months ended September 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 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 made payments of $ 4.7 million and $ 5.2 million for the three months ended September 30, 2020 and 2019, respectively, and $ 14.0 million and $ 15.6 million to the JVs for the nine months ended September 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 $ 0.3 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 paid $ 0.4 million and $ 0.3 million for the three months ended September 30, 2020 and 2019, respectively, and $ 1.2 million and $ 1.1 million for the nine months ended September 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.

The Company made payments of $ 13.0 thousand for the three months ended September 30, 2020 and $ 0.2 million for the nine months ended September 30, 2020.

Payments for the three and nine months ended September 30, 2019 were immaterial.

As described in Note 10 “Borrowings” and Note 18 “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.

The transactions were unanimously approved by the Company’s disinterested Directors.

The Founder Member Loan Term expired as of September 20, 2020.

Subsequent Events

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 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.

On November 6, 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 December 15, 2020 to holders of record as of December 1, 2020.

On November 6, 2020, the Company’s board of directors authorized a new share repurchase program of up to $ 100.0 million in Class A common stock and Virtu Financial Units by December 31, 2021.

The Company may repurchase shares from time to time in open market transactions, privately negotiated transactions or by other means.

Repurchases may also be made under Rule 10b5-1 plans.

The timing and amount of repurchase transactions will be determined by the Company’s management based on its evaluation of market conditions, share price, legal requirements and other factors.

The program may be suspended, modified or discontinued at any time without prior notice.

There are no assurances that any repurchases will actually occur.

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