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Item 8. Financial Statements and Supplementary Data

2021-02-25 compared with 2020-02-28 · 735 added, 763 removed, 1185 unchanged (56% of the section changed)

FINANCIAL STATEMENTS AND SUPPLEMENTARY SCHEDULES

FINANCIAL STATEMENTS

Index to Consolidated Financial Statements

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We have audited the accompanying consolidated statements of financial condition of Virtu Financial, Inc.

and its subsidiaries (the “Company”) as of December 31, 2019 and 2018, and the related consolidated statements of comprehensive income (loss), changes in equity, and cash flows for each of the two years in the period ended December 31, 2019, including the related notes (collectively referred to as the “consolidated financial statements”).

and its subsidiaries (the “Company”) as of December 31, 2020 and 2019, and the related consolidated statements of comprehensive income (loss), changes in equity, and cash flows for each of the three years in the period ended December 31, 2020, including the related notes (collectively referred to as the “consolidated financial statements”).

We also have audited the Company's internal control over financial reporting as of December 31, 2020, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2019 and 2018, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2019 in conformity with accounting principles generally accepted in the United States of America.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2020 and 2019, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2020 in conformity with accounting principles generally accepted in the United States of America.

Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2020, based on criteria established in Internal Control - Integrated Framework (2013) issued by the COSO.

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We believe that our audits provide a reasonable basis for our opinions.

As described in Management’s Report on Internal Control over Financial Reporting, management has excluded ITG, Inc.

from its assessment of internal control over financial reporting as of December 31, 2019 because it was acquired by the Company in a purchase business combination during 2019.

We have also excluded ITG, Inc.

from our audit of internal control over financial reporting.

is a wholly-owned subsidiary whose total assets and total net loss excluded from management’s assessment and our audit of internal control over financial reporting represent $769.1 million and a loss of $61.8 million, respectively, of the related consolidated financial statement amounts as of and for the year ended December 31, 2019.

Definition and Limitations of Internal Control over Financial Reporting

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A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company;

(ii) provide reasonable assurance that transactions are recorded as necessary to

permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company;

(ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company;

and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

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Critical Audit Matters

The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that (i) relate to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Purchase Price Accounting for the ITG Acquisition - Valuation of Intangible Assets

As described in Notes 1 and 3 to the consolidated financial statements, on March 1, 2019, the Company completed the acquisition of ITG Inc.

for net consideration of $1.0 billion, which resulted in $517.2 million of intangible assets being recorded, primarily allocated to customer relationships and technology.

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

The principal considerations for our determination that performing procedures relating to the valuation of the intangible assets from the acquisition of ITG Inc.

is a critical audit matter are (i) there was significant judgment by management when estimating the fair value of the customer relationships and technology intangible assets.

This in turn led to a high degree of auditor judgment and subjectivity in applying procedures relating to the fair value measurement of intangible assets acquired, including revenue growth rates, customer attrition rates, future tax rates, royalty rates, contributory asset charges, discount rate and the resulting cash flows;

(ii) significant audit effort was necessary in evaluating significant assumptions relating to the estimate, such as the revenue growth rates, the customer attrition rates, future tax rates, royalty rates, contributory asset charges, discount rate and the resulting cash flows;

and (iii) the audit effort involved the use of professionals with specialized skill and knowledge to assist in evaluating the appropriateness of the methodology and the reasonableness of the assumptions used in determining the valuation of the intangible assets.

Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements.

These procedures included testing the effectiveness of controls relating to the valuation of intangible assets resulting from the acquisition of ITG Inc., controls over development of the assumptions related to the valuation of intangible assets., including revenue growth rates, customer attrition rates, future tax rate, royalty rates, contributory asset charges, the discount rate and the resulting cash flows.

These procedures also included, among others, (i) reading the purchase agreement;

(ii) testing management’s process for estimating the fair value of intangible assets;

and (iii) testing management’s cash flow projections used to estimate the fair value of the intangible assets, using professionals with specialized skill and knowledge to assist in doing so, where applicable.

Testing management’s process included assessing the reasonableness forecasted financial information used in the estimate for completeness and accuracy, evaluating the appropriateness of the valuation methods and the reasonableness of significant assumptions, including the revenue growth rates, customer attrition rates, future tax rates, royalty rates, contributory asset charges and the discount rate for the intangible assets.

Evaluating the reasonableness of the revenue growth rates and customer attrition rates involved considering the past performance of the acquired businesses, as well as economic and industry forecasts.

The future tax rate was evaluated by considering the prior effective tax rates of the jurisdictions in which ITG operates.

The royalty rates and contributory asset charges were evaluated by considering rates used by comparable businesses and other industry factors.

The discount rate was evaluated by considering the cost of capital comparable businesses and other industry factors.

Income Taxes - Tax Receivable Agreement Obligations Arising from Membership Interest Exchanges During the Period

As described in Notes 2, 6 and 14 to the consolidated financial statements, in connection with the IPO and Reorganization Transactions, as defined in Note 1, the Company entered into tax receivable agreements (“TRA”) to make payments to certain

pre-IPO equity holders (“Virtu Members”).

These payments are generally equal to 85% of the applicable cash tax savings, if any, that the Company realizes as a result of favorable tax attributes that were and will continue to be available to the Company as a result of the Reorganization Transactions, exchanges of membership interests for Class A Common Stock or Class B common stock, and payments made under the tax receivable agreements .

An exchange of membership interests by the Virtu Members for Class A common stock or Class B common stock (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 consolidated financial statements, which was $269.3 million as of December 31, 2019.

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.

The computation of inside basis requires management to make judgments in estimating the components included in the inside basis as of the date of the Exchange (such as, cash received by the Company on hypothetical sale of assets, allocation of gain/loss to the Company at the time of the Exchange taking into account complex partnership tax rules).

In addition, management estimates the period of time that may generate cash tax savings of such tax attributes and the realizability of the tax attributes.

The principal considerations for our determination that performing procedures relating to the tax receivable agreement obligation is a critical audit matter are (i) management applied significant judgment to compute the inside basis and assess the likelihood of the Company having sufficient future taxable income to utilize the deferred tax asset and the tax rate (“realizability of cash tax savings”) for each Exchange, which in turn led to a high degree of auditor judgment and subjectivity in performing procedures to evaluate the initial computation and realizability of cash tax savings for each Exchange;

(ii) significant audit effort was necessary in evaluating the outside and inside basis components and the realizability of cash tax savings;

and (iii) the audit effort involved the use of professionals with specialized skill and knowledge to assist in evaluating the reasonableness of the inside basis and payment obligation generated as part of the Exchange.

The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that (i) relates to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Trading Income, net (“ Trading Income ”)

As described in Note 2 to the consolidated financial statements, $2.493 billion of the Company’s Trading Income for the year ended December 31, 2020 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 Consolidated Statements of Comprehensive Income.

The principal considerations for our determination that performing procedures relating to Trading Income is a critical audit matter are the significant audit effort in performing procedures and evaluating audit evidence related to the transactions which comprise the trading income.

Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements.

These procedures included testing the effectiveness of controls related to income taxes, including controls relating to the estimation of the TRA obligation and estimated cash tax savings reported on the consolidated financial statements.

These procedures also included, among others, (i) evaluating the reasonableness of the computation of the inside basis and outside basis and realizability of cash tax savings from the Exchange in 2019, (ii) testing the completeness and accuracy of the data provided by management used in the computation of the inside basis, outside basis and realizability of cash tax savings;

and (iii) testing the impact of the Exchange in 2019 of limited partnership units on the deferred tax asset and amounts payable under tax receivable agreements.

Professionals with specialized skill and knowledge were involved to assist with testing management's computation of the inside and outside basis, assessing the appropriateness of the applicable tax laws, and testing the calculation of the payment obligation.

These procedures included testing the effectiveness of controls relating to management’s calculation of Trading Income, including controls over the completeness, accuracy, existence, and valuation of trading assets and trading liabilities.

These procedures also included, among others, testing of the inputs used by management in their trading income calculations and independently recalculating trading income.

The procedures performed over testing of the inputs include (i) confirming a sample of trading assets, trading liabilities and cash (collectively the “equity value”) within each trading portfolio at the balance sheet date with external third parties;

(ii) developing independent prices for a sample of trading assets and liabilities at the balance sheet date and comparing management’s prices to the independently developed prices (iii) testing a sample of purchases and sales throughout the year by agreeing the quantity and price to third-party documentation, and (iv) testing the equity value of a sample of trading portfolios throughout the year by comparing the amounts to third party clearing statements.

/s/ PricewaterhouseCoopers LLP

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We have served as the Company’s auditor since 2018.

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of Virtu Financial, Inc.:

Opinion on the Financial Statements

We have audited the accompanying consolidated statements of comprehensive income, changes in equity, and cash flows of Virtu Financial, Inc.

and Subsidiaries (the ‘‘Company’’) for the year ended December 31, 2017 and the related notes (collectively referred to as the "financial statements").

In our opinion, the financial statements present fairly, in all material respects, the results of its operations and its cash flows for the year ended December 31, 2017, in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

These financial statements are the responsibility of the Company’s management.

Our responsibility is to express an opinion on the Company’s financial statements based on our audits.

We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.

The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.

As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting.

Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.

Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that our audits provide a reasonable basis for our opinion.

/s/ Deloitte & Touche LLP

March 13, 2018

We began serving as the Company’s auditor in 2011.

In 2018, we became the predecessor auditor.

Virtu Financial, Inc.

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Consolidated Statements of Financial Condition

(in thousands, except share data)

(in thousands, except share data) December 31,

2020 December 31,

Cash and cash equivalents $ 889,559 $ 732,164

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Property, equipment and capitalized software (net of accumulated depreciation of $ 455,961 and $ 457,229 as of December 31, 2020 and December 31, 2019, respectively)

113,590 116,089

Operating lease right-of-use assets 268,864 314,526

Goodwill 1,148,926 1,148,926

Intangibles (net of accumulated amortization of $ 183,494 and $ 219,239 as of December 31, 2020 and December 31, 2019, respectively)

454,499 529,638

Deferred tax assets 193,070 214,671

Other assets ($ 68,316 and $ 48,966 , at fair value, as of December 31, 2020 and December 31, 2019, respectively)

317,747 252,640

Total assets $ 9,965,798 $ 9,609,370

Liabilities and equity

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Treasury stock, at cost, 3,615,097 and 2,178,771 shares at December 31, 2020 and December 31, 2019, respectively

( 88,923 ) ( 55,005 )

Additional paid-in capital 1,160,567 1,077,398

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stockholders' equity 1,468,540 931,374

Noncontrolling interest

Virtu Financial, Inc.

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Consolidated Statements of Financial Condition

(in thousands, except share data)

(in thousands, except share data) December 31,

2020 December 31,

Noncontrolling interest 386,498 297,562

Total equity 1,855,038 1,228,936

Total liabilities and equity $ 9,965,798 $ 9,609,370

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Consolidated Statements of Comprehensive Income (Loss)

For the Year Ended December 31,

Years Ended December 31,

(in thousands, except share and per share data) 2020 2019 2018

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Commissions, net and technology services 600,510 498,544 184,339

Other, net 83,454 ( 2,146 ) 340,189

Total revenue 3,239,331 1,517,492 1,878,718

Operating Expenses:

Brokerage, exchange and clearance fees, net

Brokerage, exchange, clearance fees and payments for order flow, net 758,843 386,888 376,424

Communication and data processing 213,750 209,393 176,120

Employee compensation and payroll taxes 393,536 383,713 215,556

Payments for order flow

Interest and dividends expense 125,649 158,039 141,814

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Termination of office leases 9,608 66,452 23,357

Debt issue cost related to debt refinancing and prepayment

Debt issue cost related to debt refinancing, prepayment and commitment fees 28,879 41,132 11,727

Transaction advisory fees and expenses 2,941 26,117 11,487

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Earnings (loss) per share

Basic $ 5.19 $ ( 0.53 ) $ 2.82

Diluted $ 5.16 $ ( 0.53 ) $ 2.78

Weighted average common shares outstanding

Basic 121,692,443 113,918,103 100,875,793

Diluted 122,332,190 113,918,103 102,089,139

Net income (loss) $ 1,120,913 $ ( 103,705 ) $ 620,192

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Foreign exchange translation adjustment, net of taxes 15,318 ( 1,475 ) ( 5,127 )

Net change in unrealized cash flow hedges gain (loss), net of taxes ( 59,019 ) — —

Comprehensive income (loss) 1,077,212 ( 105,180 ) 615,065

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Years Ended December 31, 2020, 2019 and 2018

Class A Common Stock

Class C Common Stock

Class D Common Stock

Treasury Stock

Additional Paid-in Capital

Retained Earnings (Accumulated Deficit)

Accumulated Other Comprehensive Income (Loss)

Total Virtu Financial Inc.

Stockholders' Equity

Non-Controlling Interest

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

Stockholders' Equity Non-Controlling Interest Total Equity

(in thousands, except share and interest data)

Shares Amounts Shares Amounts Shares Amounts Shares Amounts Amounts

Balance at December 31, 2017 90,415,532 $ 1 17,880,239 $ — 79,610,490 $ 1 ( 616,923 ) $ ( 11,041 ) $ 900,746 $ ( 62,129 ) $ 2,991 $ 830,569 $ 321,009 $ 1,151,578

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Treasury stock purchases ( 1,007,230 ) — — — — — ( 1,561,848 ) ( 43,964 ) — ( 22,254 ) — ( 66,218 ) — ( 66,218 )

Stock option exercised 4,080,673 — — — — — — — 76,754 — — 76,754 — 76,754

Net Income (loss) — — — — — — — — — 289,441 — 289,441 330,751 620,192

Foreign exchange translation adjustment — — — — — — — — — — ( 3,073 ) ( 3,073 ) ( 2,054 ) ( 5,127 )

Distribution from Virtu Financial to non-controlling interest — — — — — — — — — — — — ( 206,903 ) ( 206,903 )

Dividends — — — — — — — — — ( 100,329 ) — ( 100,329 ) — ( 100,329 )

Issuance of Class A common stock — — — — — — — — — — — — — —

Issuance of common stock in connection with employee exchanges 3,919,462 — — — — — — — — — — — — —

Issuance of common stock in connection with secondary offering, net of offering costs 10,518,750 — — — ( 10,518,750 ) — — — ( 950 ) — — ( 950 ) — ( 950 )

Repurchase of Virtu Financial Units and corresponding number of Class C common stock in connection with employee exchanges — — ( 3,919,462 ) — — — — — — — — — — —

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Stock option exercised 121,344 — — — — — — — 931 — — 931 — 931

Net Income (loss) — — — — — — — — — ( 58,595 ) — ( 58,595 ) ( 45,110 ) ( 103,705 )

Foreign exchange translation adjustment — — — — — — — — — — ( 565 ) ( 565 ) ( 910 ) ( 1,475 )

Distribution from Virtu Financial to non-controlling interest — — — — — — — — — — — — ( 99,221 ) ( 99,221 )

Dividends — — — — — — — — — ( 112,414 ) — ( 112,414 ) — ( 112,414 )

Issuance of Class A common stock — — — — — — — — — — — — — —

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Stock option exercised 909,627 — — — — — — — 16,440 — — 16,440 — 16,440

Warrants issued — — — — — — — — 11,488 — — 11,488 — 11,488

Stockholders' Equity Non-Controlling Interest Total Equity

(in thousands, except share and interest data)

Shares Amounts Shares Amounts Shares Amounts Shares Amounts Amounts

Net Income (loss) — — — — — — — — — 649,197 — 649,197 471,716 1,120,913

Foreign exchange translation adjustment — — — — — — — — — — 8,604 8,604 6,714 15,318

Net change in unrealized cash flow hedges gains (losses) — — — — — — — — — — ( 33,444 ) ( 33,444 ) ( 25,575 ) ( 59,019 )

Distribution from Virtu Financial to non-controlling interest — — — — — — — — — — — — ( 363,919 ) ( 363,919 )

Class A Common Stock

Class C Common Stock

Class D Common Stock

Treasury Stock

Additional Paid-in Capital

Retained Earnings (Accumulated Deficit)

Accumulated Other Comprehensive Income (Loss)

Total Virtu Financial Inc.

Stockholders' Equity

Non-Controlling Interest

(in thousands, except share and interest data)

Dividends — — — — — — — — — ( 120,496 ) — ( 120,496 ) — ( 120,496 )

Issuance of Class A common stock — — — — — — — — — — — — — —

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Consolidated Statements of Cash Flows

For the Year Ended December 31,

Years Ended December 31,

(in thousands) 2020 2019 2018

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Share-based compensation 59,838 71,728 31,934

Reserve for legal matters

Write-down of assets

Connectivity early termination

Tax receivable agreement obligation reduction

Deferred taxes 21,601 ( 18,691 ) 4,131

Gain on sale of businesses

Gain on sale of business as described in Notes 4 and 5 ( 58,652 ) — ( 335,211 )

Other ( 1,926 ) ( 23,446 ) 7,677

Changes in operating assets and liabilities (1) :

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Receivables from customers ( 110,947 ) 29,733 ( 18,087 )

Operating lease right-of-use assets 39,659 ( 241,345 ) —

Other assets ( 48,472 ) 25,133 125,272

Securities loaned ( 651,843 ) 452,397 375,352

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Trading liabilities, at fair value 425,750 22,552 90,797

Operating lease liabilities ( 50,024 ) 265,671 —

Accounts payable, accrued expenses and other liabilities 81,954 ( 37,665 ) ( 50,110 )

Net cash provided by (used in) operating activities

Net cash provided by operating activities 1,060,884 168,771 714,595

Cash flows from investing activities

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Proceeds from sale of telecommunication assets — — 600

Proceeds from sale of BondPoint

Proceeds from sale of investments 7,620 — —

Proceeds from sale of business as described in Notes 4 and 5 60,592 — 400,192

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

Investment in joint ventures ( 10,412 ) ( 6,250 ) ( 23,669 )

Acquisition of KCG Holdings, net of cash acquired, described in Note 3

Acquisition of Teza Technologies

Proceeds from sale of DMM business

Net cash provided by (used in) investing activities ( 2,559 ) ( 899,643 ) 329,174

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Distribution from Virtu Financial to non-controlling interest ( 363,919 ) ( 99,221 ) ( 206,903 )

Repurchase of Class A-2 interests

Dividends ( 120,496 ) ( 112,414 ) ( 100,329 )

Repurchase of Class C common stock — ( 196 ) ( 8,216 )

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Repayment of long term borrowings ( 288,500 ) ( 500,000 ) ( 500,000 )

Repayment of KCG Notes

For the Year Ended December 31,

(in thousands)

Tax receivable agreement obligations ( 13,286 ) — ( 12,359 )

Debt issuance costs ( 9,779 ) ( 35,702 ) ( 2,261 )

Issuance of common stock, net of offering costs

Issuance of common stock in connection with secondary offering, net of offering costs — ( 375 ) ( 950 )

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Effect of exchange rate changes on cash and cash equivalents 15,318 ( 1,475 ) ( 5,127 )

Years Ended December 31,

(in thousands) 2020 2019 2018

Net increase (decrease) in cash and cash equivalents 233,725 37,233 203,160

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Non-cash investing activities

Share based compensation to developers relating to capitalized software

Share-based and accrued incentive compensation to developers relating to capitalized software 14,773 2,135 2,936

Non-cash financing activities

Tax receivable agreement described in Note 7 ( 1,388 ) ( 5,811 ) ( 991 )

Discount on issuance of senior secured credit facility

(1) Net of ITG Acquisition;

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

See accompanying notes to the Consolidated Financial Statements.

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

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

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

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

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

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

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

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

The Company has completed two significant acquisitions over the past four years that have expanded and complemented Virtu Financial's original electronic trading and marking making business.

On July 20, 2017 (the “KCG Closing Date”), the Company completed the all-cash acquisition of KCG Holdings, Inc.

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and its subsidiaries (“ITG”) in an all-cash transaction valued at $ 30.30 per ITG share, for a total of approximately $ 1.0 billion (the “ITG Acquisition”).

ITG was a global financial technology company.

ITG's business contributes to the Company's Execution Services segment.

See Note 3 "ITG Acquisition" for further details.

ITG was a global financial technology company that will contribute to the Company's Execution Services segment.

Virtu Financial’s principal U.S.

subsidiaries include Virtu Americas LLC (“VAL”), Virtu ITG LLC (“VITG”), Virtu Alternet Securities LLC (“VALT”), Virtu Financial BD LLC (“VFBD”), and Virtu Financial Capital Markets LLC (“VFCM”, collectively with VFBD, VAL, VITG, and VALT, the “broker-dealers”), which are self-clearing U.S.

broker-dealers.

Over the course of 2019, in furtherance of our integration efforts, we have been in the process of consolidating our U.S.

broker-dealers.

We submitted applications to withdraw the SEC registrations for VFBD and VFCM in 2020 and have consolidated their broker-dealer activities within VAL as of December 31, 2019.

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 and Virtu Financial Capital Markets LLC were consolidated within VAL as of December 31, 2019 and the SEC registrations were withdrawn in March 2020.

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

Other principal U.S.

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Principal foreign subsidiaries include Virtu Financial Ireland Limited and Virtu ITG Europe Limited, each formed in Ireland;

Virtu ITG UK Limited, formed in the United Kingdom;

Virtu ITG Canada Corp.

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dollars, have been prepared pursuant to the rules and regulations of the U.S.

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.

The consolidated financial statements of the Company include its equity interests in Virtu

Financial and its subsidiaries.

The Company operates and controls all business and affairs of Virtu Financial and its subsidiaries indirectly through its equity interest in Virtu Financial.

Certain reclassifications have been made to the prior periods’ consolidated financial statements in order to conform to the current period presentation.

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.

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

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

results for the periods presented.

The consolidated financial statements of the Company include its equity interests in Virtu Financial and its subsidiaries.

As sole managing member of Virtu Financial, the Company exerts control over the Group’s operations.

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All intercompany accounts and transactions have been eliminated in consolidation.

The Company has accounted for the Acquisition of KCG under the acquisition method of accounting.

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

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

The financial results for 2017 comprise our results for the entire applicable period and the results of KCG from the KCG Closing Date through December 31, 2017.

All periods prior to the KCG Closing Date comprise solely our results.

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 year ended December 31, 2019 comprise the Company's results for the entire applicable period and the results of ITG from the ITG Closing Date through December 31, 2019 .

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

Certain reclassifications have been made to the prior periods’ consolidated financial statements in order to conform to the current period presentation.

Effective for the quarter ended June 30, 2020, the Company has changed the presentation of its 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 years ended December 31, 2019 and 2018, the Company reclassified $ 102.1 million and $ 74.6 million, respectively, of Payments for order flow to Brokerage, exchange, clearance fees and payments for order flow, net, previously reported as Payments for order flow and Brokerage, exchange and clearance fees, net, respectively.

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

For the year ended December 31, 2019, the Company reclassified $ 12.6 million of sublease income from Other, net within Total revenues to net with other occupancy costs recorded in Operations and administrative within Operating expenses.

Summary of Significant Accounting Policies

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The Company's consolidated financial statements are prepared in conformity with U.S.

GAAP, which require management to make estimates and assumptions regarding measurements including the fair value of trading assets and liabilities, goodwill and intangibles, compensation accruals, capitalized software, income tax, tax receivable agreements, leases, litigation accruals, and other matters that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenue and expenses during the reporting period.

GAAP, which require management to make estimates and assumptions regarding measurements including the fair value of trading assets and liabilities, allowance for doubtful accounts, goodwill and intangibles, compensation accruals, capitalized software, income tax, tax receivable agreements, leases, litigation accruals, and other matters that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenue and expenses during the reporting period.

Accordingly, actual results could differ materially from those estimates.

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

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

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

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

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

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

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

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

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

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

deposit for Canadian and European trade clearing and settlement activity, (iii) segregated balances under a collateral account control agreement for the benefit of certain customers in Hong Kong, and (iv) funds relating to the securitization of bank guarantees supporting certain of the Company’s foreign leases.

Securities Borrowed and Securities Loaned

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

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

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

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

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

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

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

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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

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The decision to elect the fair value option is determined on an instrument by instrument basis, which must be applied to an entire instrument and is irrevocable once elected.

Derivative Instruments

Derivative Instruments - Trading

Derivative instruments are used for trading purposes, including economic hedges of trading instruments, are carried at fair value, and include futures, forward contracts, and options.

Gains or losses on these derivative instruments are recognized currently within Trading income, net in the Consolidated Statement of Comprehensive Income.

Gains or losses on these derivative instruments are recognized currently within Trading income, net in the Consolidated Statements of Comprehensive Income.

Fair values for exchange-traded derivatives, principally futures, are based on quoted market prices.

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The underlying instruments are currencies, which are actively traded.

The Company presents its derivatives balances on a net-by-counterparty basis when the criteria for offsetting are met.

The Company presents its trading derivatives balances on a net-by-counterparty basis when the criteria for offsetting are met.

Cash flows associated with such derivative activities are included in cash flows from operating activities on the Consolidated Statements of Cash Flows.

Client Commission Arrangements

Institutional customers are permitted to allocate a portion of their gross commissions to pay for research products and other services provided by third parties and the Company’s subsidiaries.

The amounts allocated for those purposes are commonly referred to as client commission arrangements.

The cost of independent research and directed brokerage arrangements is accounted for on an accrual basis.

Commission revenue is recorded when earned on a trade date basis.

Payments relating to client commission arrangements are netted against the commission revenues.

Research receivable, including prepaid research on behalf of customers and balance transfers due from other broker‑dealers, net of an allowance is included in Receivables from customers and Receivables from broker-dealers and clearing organizations, while accrued research payable is included in Accounts payable, accrued expenses, and other liabilities in the Consolidated Statements of Financial Condition.

Derivative Instruments - Hedging

The Company may use derivative instruments for risk management purposes, including cash flow hedges used to manage interest rate risk on long-term borrowings and net investment hedges used to manage foreign exchange risk.

The Company has entered into floating-to-fixed interest rate swap agreements in order to manage interest rate risk associated with its long-term debt obligations.

Additionally, the Company may seek to reduce the impact of fluctuations in foreign exchange rates on its net investment in certain non-U.S.

operations through the use of foreign currency forward contracts.

For interest rate swap agreements and foreign currency forward contracts designated as hedges, the Company assesses its risk management objectives and strategy, including identification of the hedging instrument, the hedged item and the risk exposure and how effectiveness is to be assessed prospectively and retrospectively.

The effectiveness of the hedge is assessed based on the overall changes in the fair value of the interest rate swaps or forward contracts.

For instruments that meet the criteria to be considered hedging instruments under ASC 815, any gains or losses, to the extent effective, are included in Accumulated other comprehensive income on the Consolidated Statements of Financial Condition and Other comprehensive income on the Consolidated Statements of Comprehensive Income.

The ineffective portion, if any, is recorded in Other, net on the Consolidated Statements of Comprehensive Income.

The Company presents its hedging derivatives balances on a net-by-counterparty basis when the criteria for offsetting are met.

Balances associated with hedging derivatives are recorded within Receivables from/Payables to broker-dealers and clearing organizations on the Consolidated Statements of Financial Condition.

Cash flows associated with such derivative activities are included in cash flows from operating activities on the Consolidated Statements of Cash Flows.

Property and Equipment

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Capitalized Software

The Company capitalizes costs of materials, consultants, and payroll and payroll related costs for employees incurred in developing internal-use software and software to be sold, leased, or marketed.

The Company capitalizes costs of materials, consultants, and payroll and payroll related costs for employees incurred in developing internal-use software.

Costs incurred during the preliminary project and post-implementation stages are charged to expense.

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

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

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

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

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

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

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

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

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

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

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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 Consolidated Statements of Comprehensive Income.

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

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

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

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

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

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Exchange memberships are recorded at cost or, if any other than temporary impairment in value has occurred, at a value that reflects management’s estimate of fair value.

Exchange memberships acquired in connection with the Acquisition of KCG and the ITG Acquisition were recorded at their fair values on the dates of acquisition.

Exchange stock includes shares that entitle the Company to certain trading privileges.

The Company’s exchange memberships and stock are included in Intangibles in the Consolidated Statements of Financial Condition.

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 Consolidated Statements of Comprehensive Income.

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

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

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

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

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

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

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

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

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

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

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

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

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

Brokerage, Exchange and Clearance Fees, Net

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

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

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

Payments for Order Flow

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

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

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

Rebates are recorded on an accrual basis.

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

equities to the Company.

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

The Company is subject to U.S.

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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.

The deferred tax assets are recognized in full and then reduced by a valuation allowance if it is more likely than not that some or all of the deferred tax assets will not be recognized.

Deferred tax assets are recognized in full and then reduced by a valuation allowance if it is more likely than not that some or all of the deferred tax assets will not be recognized.

The Company recognizes the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the applicable taxing authority, including resolution of the appeals or litigation processes, based on the technical merits of the position.

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

Comprehensive Income and Foreign Currency Translation

Comprehensive Income

Comprehensive income consists of two components:

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

The Company’s OCI is comprised of foreign currency translation adjustments.

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.

dollar functional currencies are translated at period-end exchange rates, and revenues and expenses are translated at weighted average exchange rates for the period.

Gains and losses resulting from translating foreign currency financial statements, net of related tax effects, are reflected in Accumulated other comprehensive income, a separate component of stockholders’ equity.

Gains and losses resulting from translating foreign currency financial statements, net of related tax effects, are reflected in Accumulated other comprehensive income, a component of stockholders’ equity.

The Company's foreign subsidiaries generally use the U.S.

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dollar, primarily comprising its subsidiaries domiciled in Ireland, which utilize the Euro and Pound Sterling as the functional currency, and subsidiaries domiciled in Canada, which utilize the Canadian dollar as the functional currency.

The Company may seek to reduce the impact of fluctuations in foreign exchange rates on its net investment in certain non-U.S.

operations through the use of foreign currency forward contracts.

For foreign currency forward contracts designated as hedges, the Company assesses its risk management objectives and strategy, including identification of the hedging instrument, the hedged item and the risk exposure and how effectiveness is to be assessed prospectively and retrospectively.

The effectiveness of the hedge is assessed based on the overall changes in the fair value of the forward contracts.

For qualifying net investment hedges, any gains or losses, to the extent effective, are included in Accumulated other comprehensive income on the Consolidated Statements of Financial Condition and Cumulative translation adjustment, net of tax, on the Consolidated Statements of Comprehensive Income.

The ineffective portion, if any, is recorded in Other, net on the consolidated statements of operations.

For instruments that meet the criteria to be considered hedging instruments under ASC 815, any gains or losses are included in Accumulated other comprehensive income on the Consolidated Statements of Financial Condition and Other comprehensive income on the Consolidated Statements of Comprehensive Income, to the extent they are effective.

Share-Based Compensation

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

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

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

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

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

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

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

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

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

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

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The Company will be considered to have a controlling financial interest and will consolidate a VIE if it has both (i) the power to direct the activities of the VIE that most significantly impact the VIE’s economic performance and (ii) the obligation to absorb losses of the VIE or the right to receive benefits from the VIE that could potentially be significant to the VIE.

In October 2016, the Company invested in a joint venture (“JV”) with nine other parties.

One of the parties was KCG.

Upon the Acquisition of KCG, KCG was required to relinquish its ownership in the JV.

As of December 31, 2019 , each of the parties owns approximately 10 % of the voting shares and 10 % of the equity of this JV.

As a result of the Acquisition of KCG, the Company owns 50 % of the voting shares and 50 % of the equity of another JV.

These two JVs build and maintain microwave communication networks in the U.S., Europe, and Asia.

The Company has interests in two joint ventures (“JV”) that build and maintain microwave communication networks in the U.S., Europe, and Asia.

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 December 31, 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 December 31, 2019 , the Company held approximately a 10 % indirect minority stake 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 December 31, 2019 , the Company held approximately a 21.4 % stake in this JV.

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

In each of the JVs, the Company does not have the power to direct the activities of the VIE that most significantly impact the VIE’s economic performance;

therefore it does not have a controlling financial interest in and does not consolidate the JVs.

The Company records its interest in each JV under the equity method of accounting and records its investment in the JVs within Other assets and its amounts payable for communication services provided by the JV within Accounts payable, accrued expenses and other liabilities on the

Consolidated Statements of Financial Condition.

As of December 31, 2020, the Company held approximately a 10 % noncontrolling interest in this JV.

As of December 31, 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, which it does not consolidate.

liabilities on the Consolidated Statements of Financial Condition.

The Company records its pro-rata share of each JV's earnings or losses within Other, net and fees related to the use of communication services provided by the JVs within Communications and data processing on the Consolidated Statements of Comprehensive Income.

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

Carrying Amount

Maximum Exposure to Loss

(in thousands)

Carrying Amount Maximum Exposure to Loss VIEs' assets

(in thousands) Asset Liability

Equity investment $ 28,969 $ — $ 28,969 $ 175,547

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

Carrying Amount

Maximum Exposure to Loss

(in thousands)

Carrying Amount Maximum Exposure to Loss VIEs' assets

(in thousands) Asset Liability

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

Accounting Pronouncements, Recently Adopted

Revenue Recognition - In May 2014, the FASB issued Accounting Standard Update (“ASU”) 2014-09, Revenue from Contracts with Customers .

ASU 2014-09 is a comprehensive new revenue recognition model that requires a company to recognize revenue to depict the transfer of goods or services to a customer at an amount that reflects the consideration it expects to receive in exchange for those goods or services.

ASU 2014-09 also requires additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes in judgments and assets recognized from costs incurred to obtain or fulfill a contract.

For a discussion of the impact of the standard on the Company’s revenues as well as the additional disclosures required by the new standard, see Note 13 “Revenues from Contracts with Customers” .

Leases — In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842) .

Under the new ASU, a lessee is required to recognize assets and liabilities for leases with lease terms of more than 12 months.

The liability is equal to the present value of the future lease payments.

The ROU asset is based on the liability, subject to adjustment, such as for initial direct costs.

For statement of comprehensive income purposes, leases are classified as either operating or finance.

Operating leases result in straight-line expense (similar to previous operating lease guidance) while finance leases result in a front-loaded expense pattern (similar to previous capital lease guidance).

Classification is based on criteria that are largely similar to those applied in previous lease accounting, but without explicit bright lines.

The Company adopted this ASU on January 1, 2019 using the modified retrospective method of implementation.

The Company elected to recognize the cumulative effect adjustment to the opening balance of retained earnings in the period of adoption rather than in the earliest period presented.

The Company elected not to recognize lease assets and lease liabilities for leases with a determined lease term of twelve months or less that are not expected to be renewed.

The Company elected several practical expedients upon transition, including the expedient not to re-assess the lease population as long as contracts were properly scoped as a lease under previous guidance, not to re-assess existing lease classification for existing leases, not to adjust existing costs that were capitalized, and not to separate lease and non-lease components of fixed lease payments.

The standard had a material impact on the Company's Consolidated Statements of Financial Condition due to the recognition of ROU assets and lease liabilities for operating leases, while the Company's accounting for finance leases remained substantially unchanged.

The standard had an immaterial impact on the Consolidated Statements of Comprehensive Income.

The additional disclosures required by the new standard have been included in Note 16 “Leases” .

Stock Compensation - In June 2018, the FASB issued ASU 2018-07, Compensation, Stock Compensation (Topic 718):

Improvements to Nonemployee Share-Based Payment Accounting , with the objective of conforming the accounting for share-based awards to non-employees to the accounting for awards granted to employees.

Previously, non-employee awards were measured at the vesting date, rather than the grant date, which effectively required the awards to be marked to market until the

award vested.

Under the new ASU, companies are required to measure non-employee awards at the fair value of the instruments issued at the grant date.

Entities can also consider the probability of the recipient satisfying any performance conditions.

The Company adopted this standard on January 1, 2019.

The Company has not granted share-based awards to non-employees, and the adoption of this ASU did not have a material impact on its consolidated financial statements.

Goodwill - In January 2017, the FASB issued ASU 2017-04, Intangibles—Goodwill and Other (Topic 350), Simplifying the Test for Goodwill Impairment .

To simplify the subsequent measurement of goodwill, this ASU eliminated Step 2 from the goodwill impairment test.

In computing the implied fair value of goodwill under Step 2, an entity had to perform procedures to determine the fair value at the impairment testing date of its assets and liabilities (including unrecognized assets and liabilities) following the procedure that would be required in determining the fair value of assets acquired and liabilities assumed in a business combination.

Instead, under this ASU, an entity should perform its annual, or interim, goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount.

An entity should recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value;

however, the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit.

This ASU also eliminated the requirements for any reporting unit with a zero or negative carrying amount to perform a qualitative assessment and, if it fails that qualitative test, to perform Step 2 of the goodwill impairment test.

This ASU is effective for public entities in fiscal years beginning after December 15, 2019.

The Company early adopted this standard as of January 1, 2019, and the adoption of this ASU did not have a material impact on its consolidated financial statements.

Accounting Pronouncements, Not Yet Adopted as of December 31, 2019

Fair Value Measurement - In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820):

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Disclosure requirements were added for changes in unrealized gains and losses for the period included in other comprehensive income for recurring Level 3 fair value measurements held at the end of the reporting period and the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements.

The ASU is effective for periods beginning after December 15, 2019, including interim periods within that fiscal year.

The Company does not expect the adoption of this ASU to have a material impact on its consolidated financial statements.

The Company adopted this ASU on January 1, 2020.

The updated disclosures are included in Note 12 "Financial Assets and Liabilities".

Consolidation - In October 2018, the FASB issued ASU 2018-17, Consolidation (Topic 810):

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Under the update, indirect interests held through related parties in common control arrangements should be considered on a proportional basis for determining whether fees paid to decision makers and service providers are variable interests.

The ASU is effective for periods beginning after December 15, 2019, including interim periods within that fiscal year.

The Company does not expect the adoption of this ASU to have a material impact on its consolidated financial statements.

The Company adopted this ASU on January 1, 2020, and it did not have a material impact on its consolidated financial statements.

Measurement of Credit Losses on Financial Instruments - In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses (Topic 326) -Measurement of Credit Losses on Financial Instruments .

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

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

In June 2019, the FASB issued ASU 2019-05, Financial Instruments-Credit Losses (Topic 326):

Targeted Transition Relief , which provides entities with an option to irrevocably elect the fair value option on an instrument-by-instrument basis for certain instruments upon adoption of the new Credit Losses standard.

The ASUs are effective for periods beginning after December 15, 2019, including interim periods within that fiscal year.

The Company has undertaken a process of identifying and developing the changes to the Company’s existing models and processes that will be required under CECL.

As of December 31 2019, the ASU is expected to impact only those financial instruments that are carried by the Company at amortized cost such as collateralized financing arrangements (repurchase agreements and securities borrowing/ lending transactions) and receivables from customers, broker-dealers and clearing

organizations.

The Company has performed a qualitative and quantitative analysis of these financial instruments, including historical loss rates and time to maturity, and as a result of its analysis, has determined that there will not be a material impact to its financial condition, results of operations and cash flows.

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

The ASU impacts only those financial instruments that are carried by the Company at amortized cost such as collateralized financing arrangements (repurchase agreements and securities borrowing/ lending transactions) and receivables from customers, broker-dealers and clearing organizations.

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

The Company applied the collateral maintenance practical expedient to its collateralized financing arrangements, including Securities borrowed and Securities purchased under agreements to resell, which are subject to collateral maintenance provisions where the borrower is required to continually adjust the amount of collateral securing the financial asset as a result of changes in the fair value of the collateral.

Interest accrued on Securities borrowed is recorded in Other assets on the Consolidated Statements of Financial Condition.

When the fair value of the collateral is less than the amortized cost basis of the financial assets, the Company evaluates whether an allowance for credit losses is necessary for the unsecured amount of the amortized cost basis, limited to the difference between the fair value of the collateral at the reporting date and the amortized cost basis of the financial assets.

Financial assets measured at amortized cost that are not eligible for the collateral maintenance practical expedient consist of commissions and fees receivable due from customers, recorded in Receivables from customers on the Consolidated Statements of Financial Condition, commissions and fees receivable due from broker-dealers and clearing organizations, unsettled trades and securities failed to deliver, recorded in Receivables from broker-dealers and clearing organizations on the Consolidated Statements of Financial Condition, as well as any unsecured amounts for instruments applying the practical expedient.

The Company continually monitors collections and payments from its clients and maintains an allowance for doubtful accounts.

The allowance is based on an estimate of the amount of potential credit losses in existing receivables.

The Company determines this allowance based on a review of aging schedules and past due balances, and considers the short-term nature of credit exposure, counterparty credit quality, historical experience and current customer and economic conditions.

The provision is recorded as bad debt expense within Operations and administrative expenses on the Consolidated Statements of Comprehensive Income.

The allowance was immaterial as of December 31, 2020.

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

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

Simplifying the Accounting for Income Taxes , which simplifies the accounting for income taxes by removing certain exceptions to the general principles for income tax accounting, and introducing other changes that touch on a variety of topics within income tax accounting.

The ASUs are effective for periods beginning after December 15, 2020, including interim periods within that fiscal year.

The Company does not expect the adoption of this ASU to have a material impact on its consolidated financial statements.

Simplifying the Accounting for Income Taxes.

The ASU removes certain exceptions related to the approach for intraperiod tax allocation, the methodology for calculating income taxes in an interim period, and the recognition of deferred tax liabilities for outside basis differences.

The ASU also amends other aspects of the guidance relating to the accounting for franchise taxes, enacted changes in tax laws or rates, the accounting for transactions that result in a step-up in the tax basis of goodwill, and other tax-related items.

The ASU is effective for periods beginning after December 15, 2020, including interim periods within that fiscal year;

early adoption is permitted.

Most amendments within the ASU are required to be applied on a prospective basis, while certain amendments must be applied on a retrospective or modified retrospective basis.

The Company does not expect the new standard to have a material impact on its Consolidated Financial Statements and related disclosures.

Reference Rate Reform - In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848):

Facilitation of the Effects of Reference Rate Reform on Financial Reporting , which is designed to ease the potential burden in accounting for the transition away from LIBOR.

The ASU applies to contracts, hedging relationships, and other transactions that reference LIBOR or another reference rate expected to be discontinued and replaced with alternative reference rates as a result of reference rate reform.

The ASU provides optional expedients and exceptions for applying U.S.

GAAP to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met.

The ASU is effective for all entities as of March 12, 2020 through December 31, 2022.

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

ITG Acquisition

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After the closing of the ITG Acquisition, VFH assumed the obligations of the Acquisition Borrower in respect of the acquisition term loans.

The Credit Agreement was subsequently amended as described further in Note 11 "Borrowings".

Additionally, on the ITG Closing Date, the Company’s fourth amended and restated credit agreement (as amended on January 2, 2018 and September 19, 2018, the “Fourth Amended and Restated Credit Agreement”) with the lenders party thereto and JPMorgan Chase Bank, N.A., as administrative agent, sole lead arranger and bookrunner, was terminated.

As described in Note 10 “Borrowings” , the Credit Agreement was amended on October 9, 2019, on which date VFH borrowed and additional $ 525.0 million of incremental first lien term loans, the proceeds of which were used together with cash on hand to redeem the Notes (as defined below).

The Indenture (as defined below) was fully terminated following such redemption.

Accounting treatment of the ITG Acquisition

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Purchase price and goodwill

The aggregate cash purchase price of $ 1.0 billion was determined as the sum of the fair value, at $ 30.30 per share, of ITG shares outstanding held by former ITG stockholders at closing and the fair value of certain ITG employee stock-based awards that were outstanding, and which vested at the ITG Closing Date.

The purchase price has been allocated to the assets acquired and liabilities assumed using their estimated fair values at the ITG Closing Date.

As of December 31, 2019, the Company has completed its analysis to finalize the allocation of the

purchase price to the ITG acquired assets and liabilities.

The Company engaged third party specialists for the purchase price allocation.

The amounts in the table below represent the allocation of the purchase price and are subject to revision during the remainder of the measurement period, a period not to exceed twelve months from the ITG Closing Date.

Adjustments to the provisional fair values of Intangible assets, Deferred tax assets, Operating lease right-of-use assets, Other assets, Accounts Payable and accrued expenses and other liabilities, Operating lease liabilities, and Deferred tax liabilities were recorded during the period from the ITG Closing Date through December 31, 2019.

The following table summarizes the estimated fair values of the assets acquired and liabilities assumed at the ITG Closing Date:

(in thousands)

March 1, 2019

Measurement Period

December 31, 2019

The aggregate cash purchase price of approximately $ 1.0 billion was determined as the sum of the fair value, at $ 30.30 per share, of ITG shares outstanding held by former ITG stockholders at closing and the fair value of certain ITG employee stock-based awards that were outstanding, and which vested at the ITG Closing Date.

The purchase price was allocated to the assets acquired and liabilities assumed using their fair values at the ITG Closing Date, as follows:

(in thousands) Adjusted Purchase Price

Cash and equivalents $ 197,072

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Property, equipment and capitalized software (net) 46,408

Intangibles 517,200

Deferred tax assets 17,605

Operating lease right-of-use assets 100,285

Other assets 31,652

Total Assets 1,388,968

Short-term borrowings 18,651

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Total identified assets acquired, net of assumed liabilities 734,542

Goodwill 312,343

Total Purchase Price $ 1,046,885

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

(in thousands)

(in thousands) Amount Amortization

Technology $ 76,000 5

Customer relationships 437,600 10

Trade names 3,600 3

Intangible assets 517,200

Goodwill 312,343

Total $ 829,543

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

The total Goodwill of $ 312.3 million has been assigned to the Execution Services segment.

The total goodwill of $ 312.3 million was assigned to the Execution Services segment.

Such goodwill is attributable to the expansion of product offerings and expected synergies of the combined workforce, products and technologies of the Company and ITG.

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On the ITG Closing Date, the Company assumed the Amended and Restated ITG 2007 Equity Plan and certain stock option awards, restricted stock unit awards, deferred stock unit awards and performance stock unit awards granted under the Amended and Restated ITG 2007 Equity Plan (the “Assumed Awards”).

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

Agreement and Plan of Merger by and between the Company, Impala Merger Sub, Inc., a Delaware corporation and an indirect wholly owned subsidiary of the Company, and ITG, dated as of November 6, 2018, the “ITG Merger Agreement”) and (iii) the performance share unit awards were converted into service-based vesting restricted stock unit awards that were no longer subject to any performance-based vesting conditions.

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

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Tax treatment of the ITG Acquisition

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

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

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

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Pro forma results

Included in the Company’s results for the year ended December 31, 2019 are results from the business acquired as a result of the ITG Acquisition, from the ITG Closing Date through December 31, 2019 as follows:

Included in the Company’s results for the year ended December 31, 2019 are results from the business acquired as a

result of the ITG Acquisition, from the ITG Closing Date through December 31, 2019 as follows:

(in thousands)

Revenues $ 347,859

Income (loss) before income taxes $ ( 64,917 )

nonrecurring costs associated with the ITG Acquisition, which comprise advisory and other professional fees incurred by the Company and ITG of $ 15.1 million and $ 18.2 million , respectively.

The financial information in the table below summarizes the combined pro forma results of operations of the Company and ITG, based on adding the pre-tax historical results of ITG and the Company, and adjusting primarily for amortization of intangibles created in the ITG Acquisition, debt raised in conjunction with the ITG Acquisition and nonrecurring costs associated with the ITG Acquisition, which comprise advisory and other professional fees incurred by the Company and ITG of $ 15.1 million and $ 18.2 million, respectively.

The pro forma data assumes all of ITG’s issued and outstanding shares of common stock, par value $ 0.01 per share, were cancelled and extinguished and converted into the right to receive $ 30.30 in cash, without interest, less any applicable withholding taxes on January 1, 2018 and does not include adjustments to reflect the Company's operating costs or expected differences in the way funds generated by the Company are invested.

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The pro forma financial information combines the historical results for the Company and ITG for the years ended December 31, 2019 and 2018:

For the Year Ended December 31,

Years Ended December 31,

(in thousands) 2019 2018

Revenue $ 1,605,340 $ 2,388,194

Net income (loss) ( 94,233 ) 514,821

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On January 2, 2018, the Company completed the sale of BondPoint to ICE for total gross proceeds of $ 400.2 million in cash.

The Company incurred one-time transaction costs of $8.5 million , which included professional fees of $ 7.1 million related to the sale and $ 1.4 million of compensation expense, which is recorded in Transaction advisory fees and expenses and Employee compensation and payroll taxes , respectively, on the Consolidated Statement of Comprehensive Income.

The Company recognized a gain on sale of $ 337.6 million , which is recorded in Other, net on the Consolidated Statement of Comprehensive Income for the year ended December 31, 2018 .

The Company incurred one-time transaction costs of $ 8.6 million, which included professional fees of $ 7.1 million related to the sale and $ 1.4 million of compensation expense, which is recorded in Transaction advisory fees and expenses and Employee compensation and payroll taxes, respectively, on the Consolidated Statements of Comprehensive Income.

The Company recognized a gain on sale of $ 337.6 million, which is recorded in Other, net on the Consolidated Statements of Comprehensive Income for the year ended December 31, 2018.

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

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Intangibles and other assets 51,687

Liabilities ( 728 )

Total carrying value of BondPoint as of December 31, 2017:

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Gain on sale of BondPoint, net of transaction costs $ 328,982

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 Consolidated Statements of Comprehensive Income.

The Company recognized a gain on sale of $ 58.7 million, which was recorded in Other, net on the Consolidated Statements of Comprehensive Income for the year ended December 31, 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 MATCHNow Closing Date.

Deferred payments will be assessed quarterly until December 31, 2022 and recorded in Other, net on the Consolidated Statements 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 Consolidated Statements 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 year ended December 31, 2020.

Earnings per Share

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Weighted average shares of common stock outstanding:

Class A 121,692,443 113,918,103 100,875,793

Basic earnings (loss) per share $ 5.19 $ ( 0.53 ) $ 2.82

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Issued and outstanding 121,692,443 113,918,103 100,875,793

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

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) 639,747 — 1,213,346

122,332,190 113,918,103 102,089,139

Diluted earnings (loss) per share $ 5.16 $ ( 0.53 ) $ 2.78

The dilutive impact excludes from the computation of earnings (loss) per share 377,677 unexercised stock options and 440,335 restricted stock units issuable pursuant to Amended and Restated Investment Technology Group, Inc.

2007 Omnibus Equity Compensation Plan for the year ended December 31, 2019, and 1,740,630 options for the year ended December 31, 2017, because the inclusion of these instruments would have been anti-dilutive.

(1) The dilutive impact excludes from the computation of earnings (loss) per share 377,677 unexercised stock options and 440,335 restricted stock units issuable pursuant to the Amended and Restated Investment Technology Group, Inc.

2007 Omnibus Equity Compensation Plan for the year ended December 31, 2019, because the inclusion of these instruments would have been anti-dilutive.

Tax Receivable Agreements

In connection with the IPO and the Reorganization Transactions, the Company entered into tax receivable agreements to make payments to certain pre-IPO equity holders (“Virtu Members”) that are generally equal to 85 % of the applicable cash tax savings, if any, that the Company actually realizes as a result of favorable tax attributes that were and will continue to be available to the Company as a result of the Reorganization Transactions, exchanges of membership interests for Class A Common Stock or Class B common stock, par value $ 0.00001 per share (the “Class B Common Stock”), (an “Exchange”), and payments made under the tax receivable agreements.

Common Stock or Class B common stock, par value $ 0.00001 per share (the “Class B Common Stock”), (an “Exchange”), and payments made under the tax receivable agreements.

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).

each Exchange, management estimates the Company’s cumulative TRA obligations to be reported on the consolidated financial statements, which amounted to $ 269.3 million as of December 31, 2019.

At each Exchange, management estimates the Company’s cumulative TRA obligations to be reported on the Consolidated Statements of Financial Condition, which amounted to $ 271.2 million and $ 269.3 million as of December 31, 2020 and December 31, 2019, respectively.

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federal and state income tax returns and realization of the cash tax savings from the favorable tax attributes.

The Company made its first payment of $ 7.0 million in February 2017 and its second payment of $ 12.4 million in September 2018.

The Company made its first payment of $ 7.0 million in February 2017, its second payment of $ 12.4 million in September 2018, and its third payment of $ 13.3 million in March 2020.

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 $ 0.9 million to $ 21.7 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 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.

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.

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

corporate income tax rate as further described in Note 14 “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.

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 19 "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 December 31, 2020 and December 31, 2019, the Company’s remaining deferred tax assets that relate to the matters described above were approximately $ 199.1 million and $ 197.6 million, respectively, and the Company’s liabilities over the next 15 years pursuant to the tax receivable agreements were approximately $ 271.2 million and $ 269.3 million, respectively.

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and one non-operating segment:

As of December 31, 2019 and December 31, 2018 , the Company’s total amount of goodwill recorded was $ 1,148.9 million and $ 836.6 million , respectively.

The Company recognized $ 312.3 million of goodwill in connection with the ITG Acquisition, which was recorded in the Execution Services segment.

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

No goodwill impairment was recognized during the years ended December 31, 2020, 2019 and 2018.

The following table presents the details of goodwill by segment:

(in thousands)

Market Making

Execution Services

Balance as of December 31, 2018

Goodwill recognized in ITG Acquisition

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

(in thousands) Market Making Execution Services Corporate Total

Balance as of December 31 $ 755,292 $ 393,634 $ — $ 1,148,926

As of December 31, 2020 and December 31, 2019, the Company's total amount of intangible assets recorded was $ 454.5 million and $ 529.6 million, respectively.

The Company acquired $ 517.2 million of intangible assets in connection with the ITG Acquisition.

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

As of December 31, 2020

(in thousands)

Gross Carrying Amount

Accumulated Amortization

Net Carrying Amount

Purchased technology

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

Customer relationships $ 486,600 $ ( 94,299 ) $ 392,301 10 to 12

Technology 136,000 ( 82,403 ) 53,597 1 to 6

Favorable occupancy leases 5,895 ( 2,839 ) 3,056 3 to 15

Exchange memberships 3,998 — 3,998 Indefinite

Trade name 3,600 ( 2,200 ) 1,400 3

ETF issuer relationships 950 ( 877 ) 73 9

ETF buyer relationships 950 ( 876 ) 74 9

Customer relationships

Favorable occupancy leases

Exchange memberships

$ 637,993 $ ( 183,494 ) $ 454,499

As of December 31, 2019

(in thousands)

Gross Carrying Amount

Accumulated Amortization

Net Carrying Amount

Purchased technology

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

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

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

Customer relationships

Favorable occupancy leases

Exchange memberships

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

Amortization expense relating to finite-lived intangible assets was approximately $ 74.3 million, $ 70.6 million and $ 26.1 million for the years ended December 31, 2020, 2019 and 2018, respectively.

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

The Company expects to record amortization expense as follows over the next five years ended December 31:

(in thousands)

2021 $ 69,676

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 December 31, 2020 and December 31, 2019:

(in thousands)

December 31, 2019

December 31, 2018

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

Due from prime brokers $ 697,293 $ 418,059

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Net equity with futures commission merchants 248,943 267,748

Unsettled trades with clearing organization

Unsettled trades with clearing organizations 118,777 214,618

Securities failed to deliver 372,965 178,324

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Net equity with futures commission merchants 77,257 50,950

Unsettled trades with clearing organization

Unsettled trades with clearing organizations 228,070 118,286

Securities failed to receive 156,804 144,494

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Total payables to broker-dealers and clearing organizations $ 876,446 $ 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 short-term credit facilities (described in Note 10 “Borrowings” ) of approximately $ 134.3 million and $ 184.6 million as of December 31, 2019 and December 31, 2018 , 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 11 "Borrowings") of approximately $ 134.7 million and $ 134.3 million as of December 31, 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 fair value of the collateralized transactions at December 31, 2020 and December 31, 2019 are summarized as follows:

(in thousands)

December 31, 2019

December 31, 2018

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

Securities received as collateral:

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Securities purchased under agreements to resell 22,866 142,922

$ 1,397,132 $ 2,023,927

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

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

(in thousands)

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

Equities $ 734,024 $ 654,366

Exchange traded notes 12,515 42,590

$ 746,539 $ 696,956

Short-term Borrowings, net

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

December 31, 2020

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

Broker-dealer credit facilities $ 36,400 $ ( 387 ) $ 36,013

Short-term bank loans 28,673 — 28,673

$ 65,073 $ ( 387 ) $ 64,686

December 31, 2019

Exchange traded notes

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

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

Short-term bank loans 45,586 — 45,586

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

Broker-Dealer Credit Facilities

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

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

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

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

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

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

The Committed Facility consists of two borrowing bases:

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

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

Each of the broker-dealers has a sublimit under Borrowing Base B Loan, from $ 100 million to $ 150 million , which bears interest at the adjusted LIBOR or base rate plus 2.50 % per annum.

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

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

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

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

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

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

On March 20, 2020, VAL 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 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.

Vincent Viola, the Company’s founder and Chairman Emeritus.

Upon the execution of and in consideration for the Lender’s commitments under the Loan Agreement, the Company delivered to the Founder Member a warrant to purchase shares of the Company’s Class A Common Stock.

Terms of the warrant are set forth in further detail in Note 19 "Capital Structure".

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

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

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

At December 31, 2020

(in thousands)

Interest Rate

Financing Available

Borrowing Outstanding

Deferred Debt Issuance Cost

Outstanding Borrowings, net

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

Broker-dealer credit facilities:

1 unchanged sentence

Committed facility 1.40 % 600,000 — — —

$ 1,000,000 $ 36,400 $ ( 387 ) $ 36,013

At December 31, 2019

(in thousands)

Interest Rate

Financing Available

Borrowing Outstanding

Deferred Debt Issuance Cost

Outstanding Borrowings, net

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

Broker-dealer credit facilities:

1 unchanged sentence

Committed facility 3.01 % 600,000 — — —

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

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

5 unchanged sentences

Committed facility 447 454 306

Demand Loan 211 — —

$ 1,995 $ 2,045 $ 2,100

Short-Term Bank Loans

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

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

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

Short-Term Credit Facilities

At December 31, 2020, there was $ 28.7 million associated with international settlement activities outstanding under these facilities at a weighted average interest rate of approximately 2.4 %.

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 %.

These short-term bank loan balances are included within Short-term borrowings on the Consolidated Statements of Financial Condition.

Prime Brokerage Credit Facilities

The Company maintains short-term credit facilities with various prime brokers and other financial institutions from which it receives execution or clearing services.

1 unchanged sentence

At December 31, 2020

Weighted Average

Interest Rate

Short-Term Credit Facilities:

Short-term credit facilities (1)

(in thousands) Weighted Average

Interest Rate Financing

Available Borrowing

Prime Brokerage Credit Facilities:

Prime brokerage credit facilities (1) 2.77 % $ 616,000 $ 134,664

$ 616,000 $ 134,664

At December 31, 2019

Weighted Average

Interest Rate

Short-Term Credit Facilities:

Short-term credit facilities (1)

(in thousands) Weighted Average

Interest Rate Financing

Available Borrowing

Prime Brokerage Credit Facilities:

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

$ 586,000 $ 134,331

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

3 unchanged sentences

At December 31, 2020

(in thousands)

Outstanding Principal

Deferred Debt Issuance Cost

Outstanding Borrowings, net

(in thousands) Maturity

Date Interest

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

Long-term borrowings:

First Lien Term Loan Facility

First Lien Term Loan Facility March 2026 3.15 % $ 1,636,512 $ ( 4,723 ) $ ( 26,367 ) $ 1,605,422

SBI bonds January 2023 5.00 % 33,898 — ( 40 ) 33,858

$ 1,670,410 $ ( 4,723 ) $ ( 26,407 ) $ 1,639,280

At December 31, 2019

(in thousands)

Outstanding Principal

Deferred Debt Issuance Cost

Outstanding Borrowings, net

(in thousands) Maturity

Date Interest

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

Long-term borrowings:

Fourth Amended and Restated Credit Facility

December 2021

Senior Secured Second Lien Notes

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

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

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

Credit Agreement

1 unchanged sentence

The Credit Agreement provided (i) a senior secured first lien term loan (together with the Incremental Term Loans, as defined below;

the “First Lien Term Loan Facility”) in an aggregate principal amount of $ 1,500 million , drawn in its entirety on the ITG Closing Date, with approximately $ 404.5 million borrowed by VFH to repay all amounts outstanding under the Existing Term Loan Facility (as defined below) and the remaining approximately $ 1,095 million borrowed by the Acquisition Borrower to finance the consideration and fees and expenses paid in connection with the ITG Acquisition, and (ii) a $ 50.0 million senior secured first lien revolving facility to VFH (the “First Lien Revolving Facility”), with a $ 5.0 million letter of credit subfacility and a $ 5.0 million swingline subfacility.

the “First Lien Term Loan Facility”) in an aggregate principal amount of $ 1,500 million, drawn in its entirety on the ITG Closing Date, of which amount approximately $ 404.5 million was borrowed by VFH to repay all amounts outstanding under the Previous Term Loan Facility (as defined below) and the remaining approximately $ 1,095 million was borrowed by the Acquisition Borrower to finance the consideration and fees and expenses paid in connection with the ITG Acquisition, and (ii) a $ 50.0 million senior secured first lien revolving facility to VFH (the “First Lien Revolving Facility”), with a $ 5.0 million letter of credit subfacility and a $ 5.0 million swingline subfacility.

After the ITG Closing Date, VFH assumed the obligations of the Acquisition Borrower in respect of the acquisition term loans.

On October 9, 2019 (the “Amendment Closing Date”), VFH entered into Amendment No.

On October 9, 2019 (the “Amendment No.

1 Closing Date”), VFH entered into an amendment No.

1 (“Amendment No.

1”), which amended the Credit Agreement dated as of March 1, 2019 (as amended by Amendment No.

1, the “Amended Credit Agreement”) by and among VFH, Virtu Financial, the lenders party thereto, and Jefferies Finance, LLC, as administrative agent and collateral agent, to, among other things, provide for $ 525.0 million in aggregate principal amount of incremental term loans (the “Incremental Term Loans”), and amend the related collateral agreement.

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

1”), which amended the Credit Agreement dated as of March 1, 2019 by and among VFH, Virtu Financial, the lenders party thereto, and Jefferies Finance, LLC, as administrative agent and collateral agent, to, among other things, provide for $ 525.0 million in aggregate principal amount of incremental term loans (the “Incremental Term Loans”), and amend the related collateral agreement.

On the Amendment No.

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

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

The Company also previously entered into a five-year $ 525 million floating to fixed interest rate swap agreement that effectively fixes interest payment obligations on $ 525.0 million of principal under the First Lien Term Loan Facility at 4.8 % through September 2024.

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

As of December 31, 2019 , $ 1,925 million was outstanding under the First Lien Term Loan Facility.

On January 29, 2020 the Company entered into a five-year $ 1,000 million floating to fixed interest rate swap agreement that effectively fixes interest payment obligations on $ 1,000 million of principal under the First Lien Term Loan Facility at 4.9 % through January 2025.

The term loan borrowings and revolver borrowings under the Credit Agreement bear interest at a per annum rate equal to, at the Company's election, either (i) the greatest of (a) the prime rate in effect, (b) the greater of (1) the federal funds effective rate and (2) the overnight bank funding rate, in each case plus 0.5 % , (c) an adjusted LIBOR rate for a Eurodollar borrowing with an interest period of one month plus 1 % and (d) 1.00 % , plus, in each case, 2.50 % , with a stepdown to 2.25 % based on VFH’s first lien leverage ratio, or (ii) the greater of (x) an adjusted LIBOR rate for the interest period in effect and (y) 0 % , plus, in each case, 3.50 % , with a stepdown to 3.25 % based on VFH’s first lien leverage ratio.

On March 2, 2020 (the “Amendment No.

2 Closing Date”), VFH entered into a second amendment No.

2 (“Amendment No.

2”), which further amended the Credit Agreement (as amended by Amendment No.

1 and Amendment No.

2, the “Amended Credit Agreement”) to, among other things, reduce the interest rate spread over adjusted LIBOR or the alternate base rate by 0.50 % per annum and eliminated any stepdown in the spread based on VFH's first lien leverage ratio.

The term loan borrowings and revolver borrowings under the Amended Credit Agreement bear interest at a per annum rate equal to, at the Company's election, either (i) the greatest of (a) the prime rate in effect, (b) the greater of (1) the federal funds effective

rate and (2) the overnight bank funding rate, in each case plus 0.50 %, (c) an adjusted LIBOR rate for a Eurodollar borrowing with an interest period of one month plus 1.00 % and (d) 1.00 %, plus, in each case, 2.00 %, or (ii) the greater of (x) an adjusted LIBOR rate for the interest period in effect and (y) 0 %, plus, in each case, 3.00 %.

In addition, a commitment fee accrues at a rate of 0.50 % per annum on the average daily unused amount of the First Lien Revolving Facility, with stepdowns to 0.375 % and 0.25 % per annum based on VFH’s first lien leverage ratio, and is payable quarterly in arrears.

The First Lien Revolving Facility under the Credit Agreement is subject to a springing net first lien leverage ratio test which may spring into effect as of the last day of a fiscal quarter if usage of the aggregate revolving commitments exceeds a specified level as of such date.

The First Lien Revolving Facility under the Amended Credit Agreement is subject to a springing net first lien leverage ratio test which may spring into effect as of the last day of a fiscal quarter if usage of the aggregate revolving commitments exceeds a specified level as of such date.

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

Borrowings under the 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 Credit Agreement, term loans will mature on March 1, 2026.

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, the term loans will mature on March 1, 2026.

The term loans amortize in annual installments equal to 1.0 % of the original aggregate principal amount of the term loans.

As of December 31, 2020, $ 1,637 million was outstanding under the First Lien Term Loan Facility.

During the years ended December 31, 2020 and 2019, repayments of $ 288.5 million and $ 100 million, respectively, were made under this facility.

The revolving commitments will terminate on March 1, 2022.

The 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 Credit Agreement will be entitled to take various actions, including the acceleration of amounts outstanding under the Credit Agreement and all actions permitted to be taken by a secured creditor in respect of the collateral securing the obligations under the 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 $ 1.15 billion 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.

There were no outstanding borrowings under the First Lien Revolving Facility as of December 31, 2020 or December 31, 2019.

Interest expense in relation to this facility was $ 0.5 million for the year ended December 31, 2020.

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.

In October 2019, the Company entered into a five-year $ 525 million floating-to-fixed interest rate swap agreement.

The Company also entered into a five-year $ 1,000 million floating-to-fixed interest rate swap agreement in January 2020.

As these two interest rate swaps meet the criteria to be considered qualifying cash flow hedges under ASC 815 in 2020, they effectively fix interest payment obligations on $ 1,000 million and $ 525.0 million of principal under the First Lien Term Loan Facility at rates of 4.4 % and 4.3 % through January 2025 and September 2024, respectively, based on the interest rates set forth in 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 “Previous Term Loan Facility”).

The Previous 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

10 unchanged sentences

and SBI Insurance Co., Ltd.

The proceeds from the SBI Bonds were used to partially fund the investment in SBI (as described in Note 11 “Financial Assets and Liabilities” ).

The proceeds from the SBI Bonds were used to partially fund the investment in JNX (as described in Note 12 "Financial Assets and Liabilities").

The SBI Bonds are guaranteed by Virtu Financial.

3 unchanged sentences

The principal balance was ¥ 3.5 billion ($ 33.9 million) as of December 31, 2020 and ¥ 3.5 billion ($ 32.2 million) as of December 31, 2019.

The Company recorded gains of $ 0.3 million , $ 0.8 million and $ 1.1 million during the years ended December 31, 2019 , 2018 and 2017, respectively.

The Company recorded losses of $ 1.7 million, $ 0.3 million, and $ 0.8 million during the years ended December 31, 2020, 2019 and 2018, respectively, due to changes in foreign currency rates.

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

(in thousands)

December 31, 2019

(in thousands) December 31, 2020

2025 1,636,512

Total principal of long-term borrowings $ 1,670,410

12 unchanged sentences

Consequently, such financial instruments are classified as Level 2.

There were no transfers of financial instruments between levels during the years ended December 31, 2019 , 2018 and 2017.

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

December 31, 2020

(in thousands)

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

Significant Other Observable Inputs (Level 2)

Significant Unobservable Inputs (Level 3)

Counterparty and Cash Collateral Netting

Total Fair Value

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

Financial instruments owned, at fair value:

4 unchanged sentences

Currency forwards — 341,360 — ( 291,964 ) 49,396

Options 9,080 — — — 9,080

$ 922,393 $ 1,738,763 $ — $ ( 291,964 ) $ 2,369,192

Financial instruments owned, pledged as collateral:

1 unchanged sentence

Exchange traded notes 2 12,513 — — 12,515

$ 496,945 $ 249,594 $ — $ — $ 746,539

Equity investment $ — $ — $ 66,030 $ — $ 66,030

Exchange stock 2,286 — — — 2,286

$ 2,286 $ — $ 66,030 $ — $ 68,316

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

4 unchanged sentences

Currency forwards — 292,965 — ( 292,870 ) 95

Options 9,241 — — — 9,241

$ 1,399,496 $ 1,817,082 $ — $ ( 292,870 ) $ 2,923,708

Payables to broker dealers and clearing organizations:

Interest rate swap $ — $ 63,513 $ — $ — $ 63,513

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

December 31, 2019

(in thousands)

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

Significant Other Observable Inputs (Level 2)

Significant Unobservable Inputs (Level 3)

Counterparty and Cash Collateral Netting

Total Fair Value

Financial instruments owned, at fair value:

4 unchanged sentences

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

Options 8,538 — — — 8,538

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

Financial instruments owned, pledged as collateral:

Equity securities $ 362,439 $ 291,927 $ — $ — $ 654,366

government obligations

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

$ 362,451 $ 334,505 $ — $ — $ 696,956

Equity investment $ — $ — $ 46,245 $ — $ 46,245

Exchange stock 2,721 — — — 2,721

$ 2,721 $ — $ 46,245 $ — $ 48,966

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

4 unchanged sentences

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

SBI Investment

The Company has a minority investment (the “SBI Investment”) in SBI Japannext Co., Ltd.

(“SBI”), a proprietary trading system based in Tokyo.

In connection with the SBI Investment, the Company issued the SBI Bonds (as described in Note 10 “Borrowings” ) and used the proceeds to partially finance the transaction.

As of December 31, 2019 , the fair value of the SBI Investment was determined using the discounted cash flow method, an income approach, with the discount rate of 15.0 % applied to the cash flow forecasts.

The Company also used a market approach based on 12.6 x average price/earnings multiples of comparable companies to corroborate the income approach.

The fair value of the SBI Investment at December 31, 2019 was determined by taking the weighted average of enterprise valuations based on discounted cash flow on projected income from the next five years , the implied enterprise valuations on comparable companies, and the implied enterprise valuations on comparable transactions.

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

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

Options 3,087 — — — 3,087

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

JNX Investment

The Company has a minority investment (the “JNX Investment”) in Japannext Co., Ltd.

(“JNX”), formerly known as SBI Japannext Co., Ltd., a proprietary trading system based in Tokyo.

In connection with the JNX Investment, the Company issued the SBI Bonds (as described in Note 11 "Borrowings") and used the proceeds to partially finance the transaction.

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

As of December 31, 2019 and 2020, the fair value of the JNX Investment was determined using a weighted average of valuations using 1) the discounted cash flow method, an income approach;

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

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

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

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

December 31, 2020

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

Equity investment $ 66,030 Discounted cash flow Estimated revenue growth ( 9.0 )% - 39.0 %

Discount rate 14.4 % - 14.4 %

Market Future enterprise value/ EBIDTA ratio 12.2 x - 21.9 x

December 31, 2019

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

Equity investment $ 46,245 Discounted cash flow Estimated revenue growth 5.0 % - 33.0 %

Discount rate 14.4 % - 14.4 %

Market Future enterprise value/ EBIDTA ratio 5.4 x - 24.6 x

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

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

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

Other assets:

Equity investment $ 46,245 $ — $ 19,785 $ — $ — $ 66,030 $ 19,785

Total $ 46,245 $ — $ 19,785 $ — $ — $ 66,030 $ 19,785

(1) Total realized and unrealized gains/(losses) includes gains and losses realized on the SBI Bonds (see Note 11 "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 JNX Investment.

Year Ended December 31, 2019

(in thousands) Balance at December 31, 2018 Purchases Total Realized and Unrealized Gains / (Losses) (1) Net Transfers into (out of) Level 3 Settlement Balance at December 31, 2019 Change in Net Unrealized Gains / (Losses) on Investments still held at December 31, 2019

Other assets:

Equity investment $ 45,856 $ — $ 389 $ — $ — $ 46,245 $ 389

Total $ 45,856 $ — $ 389 $ — $ — $ 46,245 $ 389

Financial Instruments Not Measured at Fair Value

The table below presents the carrying value, fair value and fair value hierarchy category of certain financial instruments that are not measured at fair value on the Consolidated Statement of Financial Condition.

The table below excludes non-financial assets and liabilities.

3 unchanged sentences

December 31, 2020

Quoted Prices in Active Markets for Identical Assets

Significant Other Observable Inputs

Significant Unobservable Inputs

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

(in thousands)

Carrying Value

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

Cash and cash equivalents $ 889,559 $ 889,559 $ 889,559 $ — $ —

3 unchanged sentences

Receivables from broker-dealers and clearing organizations 1,684,006 1,684,006 173,578 1,510,428 —

Receivables from customers 214,478 214,478 — 214,478 —

Other assets (1) 21,735 21,735 — 21,735 —

Total Assets $ 4,375,106 $ 4,375,106 $ 1,180,583 $ 3,194,523 $ —

Short-term borrowings $ 64,686 $ 65,073 $ — $ 65,073 $ —

3 unchanged sentences

Payables to broker-dealers and clearing organizations (2) 876,446 876,446 3,517 872,929 —

Payables to customers 118,826 118,826 — 118,826 —

Other liabilities (3) 9,208 9,208 — 9,208 —

Total Liabilities $ 4,117,937 $ 4,151,500 $ 3,517 $ 4,147,983 $ —

(1) Includes cash collateral and deposits, and interest and dividends receivables.

(2) Payables to broker-dealers and clearing organizations include interest rate swaps carried at fair value.

(3) Includes deposits, interest and dividends payable.

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

December 31, 2019

Quoted Prices in Active Markets for Identical Assets

Significant Other Observable Inputs

Significant Unobservable Inputs

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

(in thousands)

Carrying Value

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

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

Cash restricted or segregated under regulations and other 41,116 41,116 41,116 — —

Securities borrowed 1,928,763 1,928,763 — 1,928,763 —

1 unchanged sentence

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

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

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

4 unchanged sentences

Total Liabilities $ 4,758,943 $ 4,810,027 $ 49,514 $ 4,760,513 $ —

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

Year Ended December 31, 2019

(in thousands)

Balance at December 31, 2018

Total Realized and Unrealized Gains / (Losses)

Net Transfers into (out of) Level 3

Balance at December 31, 2019

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

Other assets:

Equity investment

Year Ended December 31, 2018

(in thousands)

Balance at December 31, 2017

Total Realized and Unrealized Gains / (Losses)

Net Transfers into (out of) Level 3

Balance at December 31, 2018

Change in Net Unrealized Gains / (Losses) on Investments still held at December 31, 2018

Other assets:

Equity investment

(1) Receivables from broker-dealers and clearing organizations include interest rate swap carried at fair value.

Offsetting of Financial Assets and Liabilities

4 unchanged sentences

December 31, 2020

Gross Amounts of Recognized Assets

Amounts Offset in the Consolidated Statement of Financial Condition

Amounts of Assets Presented in the Consolidated Statement of Financial Condition

Amounts Not Offset in the Consolidated Statement of Financial Condition

(in thousands)

Financial Instruments

Cash Collateral Received

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

Amounts Not Offset in the Consolidated Statements of Financial Condition

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

Offsetting of Financial Assets:

3 unchanged sentences

Currency forwards 341,360 ( 291,964 ) 49,396 — — 49,396

Gross Amounts of Recognized Liabilities

Gross Amounts Offset in the Consolidated Statement of Financial Condition

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

Amounts Not Offset in the Consolidated Statement of Financial Condition

(in thousands)

Financial Instruments

Cash Collateral Pledged

Options 9,080 — 9,080 — ( 9,080 ) —

Total $ 1,798,322 $ ( 291,964 ) $ 1,506,358 $ ( 1,397,132 ) $ ( 18,766 ) $ 90,460

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

Amounts Not Offset in the Consolidated Statements of Financial Condition

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

Offsetting of Financial Liabilities:

1 unchanged sentence

Securities sold under agreements to repurchase 461,235 — 461,235 ( 461,235 ) — —

Payable to broker-dealers and clearing organizations

Interest rate swaps 63,513 — 63,513 — ( 63,162 ) 351

Trading liabilities, at fair value:

Currency forwards 292,965 ( 292,870 ) 95 — — 95

Options 9,241 — 9,241 — ( 9,080 ) 161

Total $ 1,775,210 $ ( 292,870 ) $ 1,482,340 $ ( 1,382,828 ) $ ( 90,042 ) $ 9,470

December 31, 2019

Gross Amounts of Recognized Assets

Gross Amounts Offset in the Consolidated Statement of Financial Condition

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

Gross Amounts Not Offset in the Consolidated Statement of Financial Condition

(in thousands)

Financial Instruments

Cash Collateral Received

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

Amounts Not Offset in the Consolidated Statements of Financial Condition

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

Offsetting of Financial Assets:

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

Gross Amounts of Recognized Liabilities

Gross Amounts Offset in the Consolidated Statement of Financial Condition

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

Gross Amounts Not Offset in the Consolidated Statement of Financial Condition

(in thousands)

Financial Instruments

Cash Collateral Pledged

Options 8,538 — 8,538 ( 8,537 ) — 1

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

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

Amounts Not Offset in the Consolidated Statements of Financial Condition

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

Offsetting of Financial Liabilities:

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

Options 3,087 — 3,087 ( 3,087 ) — —

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

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

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Remaining Contractual Maturity

(in thousands)

Overnight and Continuous

Less than 30 days

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

Days Greater than 90

Securities sold under agreements to repurchase:

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government obligations 86,235 86,235

Total 86,235 125,000 50,000 200,000 — 461,235

Securities loaned:

Equity securities 948,256 — — — — 948,256

Total $ 948,256 $ — $ — $ — $ — $ 948,256

December 31, 2019

Remaining Contractual Maturity

(in thousands)

Overnight and Continuous

Less than 30 days

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

Days Greater than 90

Securities sold under agreements to repurchase:

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

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

Securities loaned:

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

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

Derivative Instruments

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

(in thousands)

December 31, 2019

December 31, 2018

Derivatives Assets

Financial Statements Location

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

Derivatives Assets Financial Statements Location Fair Value Notional Fair Value Notional

Derivative instruments not designated as hedging instruments:

Equities futures

Receivables from broker-dealers and clearing organizations

Commodity futures

Receivables from broker-dealers and clearing organizations

Currency futures

Receivables from broker-dealers and clearing organizations

Fixed income futures

Receivables from broker-dealers and clearing organizations

Financial instruments owned

Currency forwards

Financial instruments owned

Interest rate swap

Derivatives Liabilities

Financial Statements Location

Equities futures Receivables from broker-dealers and clearing organizations $ 4,669 $ 2,208,899 $ ( 1,366 ) $ 4,502,017

Commodity futures Receivables from broker-dealers and clearing organizations 173,889 6,237,389 40,656 7,758,974

Currency futures Receivables from broker-dealers and clearing organizations ( 11,736 ) 2,823,277 ( 2,860 ) 1,116,246

Fixed income futures Receivables from broker-dealers and clearing organizations 42 102,476 47 155,697

Options Financial instruments owned 9,080 746,723 8,538 442,808

Currency forwards Financial instruments owned 341,360 30,596,681 242,552 24,369,818

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

Derivatives Liabilities Financial Statements Location Fair Value Notional Fair Value Notional

Derivative instruments not designated as hedging instruments:

Equities futures

Payables to broker-dealers and clearing organizations

Commodity futures

Payables to broker-dealers and clearing organizations

Currency futures

Payables to broker-dealers and clearing organizations

Fixed income futures

Payables to broker-dealers and clearing organizations

Financial instruments sold, not yet purchased

Currency forwards

Financial instruments sold, not yet purchased

Equities futures Payables to broker-dealers and clearing organizations $ 31 $ 90,219 $ 751 $ 83,803

Commodity futures Payables to broker-dealers and clearing organizations ( 5,397 ) 27,287 ( 45,175 ) 3,604,979

Currency futures Payables to broker-dealers and clearing organizations 3,598 2,269,898 ( 23,223 ) 6,594,991

Fixed income futures Payables to broker-dealers and clearing organizations — 1,566 94 190,938

Options Financial instruments sold, not yet purchased 9,241 736,997 3,087 436,422

Currency forwards Financial instruments sold, not yet purchased 292,965 30,572,490 196,554 24,346,818

Derivative instruments designated as hedging instruments:

Currency forwards

Financial instruments sold, not yet purchased

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

The following table summarizes the net gain (loss) from derivative instruments not designated as hedging instruments under ASC 815, which are recorded in total revenues, and from those designated as hedging instruments under ASC 815, which are recorded in accumulated other comprehensive income in the accompanying Consolidated Statements of Comprehensive Income for the years ended December 31, 2019 , 2018 and 2017.

Interest rate swaps Payables to broker-dealers and clearing organizations 63,513 1,525,000 — —

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

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 Consolidated Statements of Comprehensive Income for the years ended December 31, 2020, 2019 and 2018.

Years Ended December 31,

(in thousands)

Financial Statements Location

(in thousands) Financial Statements Location 2020 2019 2018

Derivative instruments not designated as hedging instruments:

Trading income, net

Currency forwards

Trading income, net

Interest rate swap (1)

Futures Trading income, net $ ( 6,217 ) $ 247,619 $ ( 309,598 )

Currency forwards Trading income, net 249,856 ( 44,293 ) 174,310

Options Trading income, net 84,695 19,692 ( 6,161 )

Interest rate swap on term loan Other, net ( 1,890 ) 8,976 —

$ 326,444 $ 231,994 $ ( 141,449 )

Derivative instruments designated as hedging instruments:

Foreign exchange - forward contract

Accumulated other comprehensive income

(1) As disclosed in “Note 10 Borrowings”, the Company's Credit Agreement was amended on October 9, 2019, on which date VFH borrowed an additional $ 525.0 million of Incremental Term Loans.

The Company entered into a five-year $ 525 million floating to fixed interest rate swap agreement that effectively fixes interest payment obligations on the Incremental Term Loans at 4.8 % through September 2024.

As of December 31, 2019, this interest rate swap did not meet the criteria in ASC 815 to qualify for hedge accounting, and gains and losses due to the derivative's change in market value were recorded in Other, net within total revenues.

Interest rate swaps (1) Other comprehensive income $ ( 69,462 ) $ — —

Foreign exchange - forward contract Other comprehensive income — — 63

$ ( 69,462 ) $ — $ 63

(1) The Company entered into a five-year $ 1,000 million floating-to-fixed interest rate swap agreement in the first quarter of 2020 and 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 in 2020, and as such, the mark-to-market gains (losses) on the instruments were recorded within Other comprehensive income on the Consolidated Statements of Comprehensive Income for the year ended December 31, 2020.

Revenues from Contracts with Customers

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The Company adopted ASC Topic 606, Revenue from Contracts with Customers , as of January 1, 2018 in the consolidated financial statements by applying the modified retrospective method.

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

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

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

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

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

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

Commissions, net .

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accordingly, commission revenues are recorded on the trade date.

Commission revenues are paid on settlement date;

Commission revenues are received on settlement date;

therefore, a receivable is recognized as of the trade date.

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

Technology services.

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

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

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

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

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

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

Workflow technology.

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

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

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

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

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

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

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Year Ended December 31, 2020

(in thousands)

Market Making

Execution Services

(in thousands) Market Making Execution Services Corporate Total

Revenues from contracts with customers:

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Workflow technology — 101,211 — 101,211

Analytics — 41,148 — 41,148

Total revenue from contracts with customers 52,453 548,057 — 600,510

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Year Ended December 31, 2019

(in thousands)

Market Making

Execution Services

(in thousands) Market Making Execution Services Corporate Total

Revenues from contracts with customers:

Commissions, net $ 23,526 $ 357,401 $ — $ 380,927

Workflow technology — 82,610 — 82,610

Analytics — 35,007 35,007

Total revenue from contracts with customers 23,526 475,018 — 498,544

Other sources of revenue 1,004,568 16,718 ( 2,338 ) 1,018,948

Total revenues $ 1,028,094 $ 491,736 $ ( 2,338 ) $ 1,517,492

Timing of revenue recognition:

Services transferred at a point in time $ 1,028,094 $ 425,549 $ ( 2,338 ) $ 1,451,305

Services transferred over time — 66,187 — 66,187

Total revenues $ 1,028,094 $ 491,736 $ ( 2,338 ) $ 1,517,492

Year Ended December 31, 2018

(in thousands) Market Making Execution Services Corporate Total

Revenues from contracts with customers:

Commissions, net $ 28,813 $ 150,206 $ — $ 179,019

Technology services — 5,320 — 5,320

Workflow technology — — — —

Analytics — — —

Total revenue from contracts with customers 28,813 155,526 — 184,339

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Remaining Performance Obligations and Revenue Recognized from Past Performance Obligations

As of December 31, 2019 , the aggregate amount of the transaction price allocated to the performance obligations relating to technology services, workflow technology, and analytics revenues that are unsatisfied (or partially unsatisfied) was not material.

As of December 31, 2020 and 2019, the aggregate amount of the transaction price allocated to the performance obligations relating to workflow technology and analytics revenues that are unsatisfied (or partially unsatisfied) was not material.

Contract Assets and Contract Liabilities

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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 $ 8.6 million as of December 31, 2019 .

During the year ended December 31, 2019 , the Company recognized revenue of $ 32.6 million that had been initially recorded as deferred revenue.

Deferred revenue related to contracts with customers was $ 9.3 million and $ 8.6 million as of December 31, 2020 and December 31, 2019, respectively.

The Company recognized revenue of $ 33.1 million and $ 32.6 million during the years ended December 31, 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.

Income before income taxes and noncontrolling interest is as follows for the years ended December 31, 2020, 2019 and 2018:

For the Year Ended December 31,

Years Ended December 31,

2020 2019 2018

(in thousands)

operations $ 1,214,282 $ ( 103,080 ) $ 659,937

operations 168,555 ( 12,902 ) 36,426

$ 1,382,837 $ ( 115,982 ) $ 696,363

The provision for income taxes consists of the following for the years ended December 31, 2020, 2019 and 2018:

For the Year Ended December 31,

Years Ended December 31,

(in thousands) 2020 2019 2018

Current provision (benefit)

Federal $ 148,034 $ ( 1,861 ) $ 49,047

State and Local 52,040 4,362 18,697

Foreign 37,474 3,675 4,276

Deferred provision (benefit)

Federal 26,255 ( 13,422 ) 4,986

State and Local ( 2,580 ) ( 1,455 ) ( 1,599 )

Foreign 701 ( 3,576 ) 764

Provision for income taxes $ 261,924 $ ( 12,277 ) $ 76,171

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federal statutory rate to the provision for income taxes for the

years ended December 31, 2019, 2018 and 2017:

For the Year Ended December 31,

years ended December 31, 2020, 2019 and 2018 is as follows:

Years Ended December 31,

2020 2019 2018

(in thousands, except percentages)

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State and local taxes, net of federal benefit 3.4 % 2.4 % 1.9 %

Impact of 2017 Tax Act on deferred tax assets

Impact of 2017 Tax Act on tax receivable agreement obligation

Non-deductible expenses, net 0.1 % ( 3.7 ) % ( 0.3 ) %

Other, net 1.9 % ( 1.0 ) % ( 1.5 ) %

Effective tax rate 18.9 % 10.6 % 10.9 %

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Share-based compensation 17,140 15,572

Intangibles 2,563 2,467

Fixed assets and other 37,100 44,908

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Deferred income tax liabilities

Intangibles $ 63,052 $ 71,700

Total deferred income tax liabilities $ 63,052 $ 71,700

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Included in Other assets on the Consolidated Statements of Financial Condition at December 31, 2020 and December 31, 2019 are current income tax receivables of $ 83.1 million and $ 39.3 million, respectively.

The balances at December 31, 2019 and December 31, 2018 primarily comprise income tax benefits due to the Company from federal, state and local, and foreign tax jurisdictions based on income before taxes.

These balances primarily comprise income tax benefits due to the Company from federal, state and local, and foreign tax jurisdictions based on income before taxes.

Included in Accounts payable, accrued expenses and other liabilities on the Consolidated Statements of Financial Condition at December 31, 2020 and December 31, 2019 are current tax liabilities of $ 37.9 million and $ 11.5 million, respectively.

The balances at December 31, 2019 and December 31, 2018 primarily comprise income taxes owed to federal, state and local, and foreign tax jurisdictions based on income before taxes.

These balances primarily comprise 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 7 "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.

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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 December 31, 2019, the Company had U.S.

federal net operating loss carryforwards of $ 91.3 million .

The Company recorded a deferred tax asset related to these federal net operating carryforwards of $ 19.2 million .

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

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 December 31, 2020, the Company did not have any U.S.

federal net operating loss carryforwards and therefore the Company did not record a deferred tax asset related to any federal net operating loss carryforwards.

At December 31, 2020, the Company recorded deferred income taxes related to state and local net operating losses of $ 0.4 million.

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

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

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

net operating losses at December 31, 2020 and December 31, 2019 of $ 75.1 million and $ 86.3 million, respectively, and has recorded a related deferred tax asset of $ 15.2 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 December 31, 2020 and December 31, 2019, respectively, as it is more likely than not that a portion of this deferred tax asset will not be realized.

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

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federal, state, local and foreign jurisdictions.

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

As of December 31, 2020, the Company’s tax years for 2015 through 2019 and 2017 through 2019 are subject to examination by U.S.

tax authorities, respectively.

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

In addition, the Company is subject to state and local income tax examinations in various jurisdictions for the tax years 2013 through 2019.

The final outcome of these examinations is not yet determinable.

The outcome of these examinations is not yet determinable.

However, the Company anticipates that adjustments to the unrecognized tax benefits, if any, will not result in a material change to the 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 Consolidated Statement of Comprehensive Income.

The Company had $ 8.6 million of unrecognized tax benefits as of December 31, 2020, all of which would affect the Company’s effective tax rate if recognized.

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The table below presents the changes in the liability for unrecognized tax benefits.

This liability is included in Accounts payable and accrued expenses and other liabilities on the Consolidated Statement of Financial Condition.

This liability is included in Accounts payable and accrued expenses and other liabilities on the Consolidated Statements of Financial Condition.

(in thousands)

Balance at December 31, 2017 $ 7,300

Increase from Acquisition of KCG

Decreases based on tax positions related to prior period ( 840 )

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Balance at December 31, 2018 7,328

Increase from ITG Acquisition 2,713

Decreases based on tax positions related to prior period ( 1,263 )

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Balance at December 31, 2019 8,778

Increase from ITG Acquisition

Decreases based on tax positions related to prior period ( 311 )

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

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

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

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

KCG Holdings, Inc., et al.

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

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

In October 2019, the parties reached an agreement in principle to settle the matter.

The agreement is subject to customary conditions including execution of definitive settlement documentation and final court approval.

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

Though the Company believes the likelihood of approval of the settlement is probable, we cannot predict with certainty the outcome of the litigation, and if an agreement is not reached or the settlement is not finally approved by the Court, we believe that we have meritorious defenses to the claims in the operative complaint.

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

ProShares Trust II, et al.

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

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

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

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

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

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

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

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

The 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.

As a result of the ITG Acquisition, the Company assumed potential liabilities relating to ITG’s business, including but not limited to those potential liabilities arising from or related to pending, threatened or potential litigation or regulatory matters.

These matters include but not are not necessarily limited to a Statement of Claim filed on July 27, 2018 by a former employee of ITG requesting a FINRA arbitration.

The former ITG employee alleged that ITG breached the non-disparagement clause in his July 2011 separation agreement and tortiously interfered with his business relations.

On June 26, 2019, the former employee informed the Company that he was seeking damages of approximately $ 65 million (exclusive of claims for pre-judgment interest, punitive damages, costs and fees).

In an award dated October 24, 2019, the FINRA arbitration panel awarded the claimant $ 3 million in compensatory damages, and ordered the Company to pay additional fees and expenses which totaled

an additional amount of approximately $ 3 million .

The Company has paid all such amounts due to the claimant in full and final satisfaction of the award.

The Company is vigorously seeking the reimbursement of a portion of the award from an insurance carrier.

On November 30, 2020, the Company was named as a defendant in In re United States Oil Fund, LP Securities Litigation , No.

The consolidated amended complaint was filed in federal district court in New York on behalf of a putative class, and asserts claims against the Company and numerous other financial institutions under Section 11 of the Securities Act of 1933 in connection with trading in United States Oil Fund, LP, a crude oil ETF.

The complaint also names the ETF, its sponsor, and related individuals as defendants.

The complaint did not specify the amount of alleged damages.

Defendants moved to dismiss the consolidated amended complaint on January 29, 2021.

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

Other Legal and Regulatory Matters

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There has recently been an increased focus by regulators on Anti-Money Laundering and sanctions compliance by broker-dealers and similar entities, as well as an enhanced interest on suspicious activity reporting and transactions involving microcap and low-priced securities.

In addition, there has been an increased focus by Congress, federal and state regulators, SROs and the media on market structure issues, and in particular, high frequency trading, best execution, internalization, alternative trading system (“ATS”) manner of operations, market fragmentation and complexity, colocation, cybersecurity, access to market data feeds and remuneration arrangements, such as payment for order flow and exchange fee structures.

From time to time, the Company is the subject of requests for information and documents from the SEC, the Financial Industry Regulatory Authority and other regulators.

In addition, there has been an increased focus by Congress, federal and state regulators, SROs and the media on market structure issues, and in particular, the retail trading environment in the U.S.

and relationships between retail broker-dealers and market making firms, high frequency trading, best execution, internalization, alternative trading system (“ATS”) manner of operations, market fragmentation and complexity, colocation, cybersecurity, access to market data feeds and remuneration arrangements, such as payment for order flow and other payment and rebate structures and arrangements.

From time to time, the Company is the subject of requests for information and documents from the SEC, the Financial Industry Regulatory Authority, states attorney generals, and other regulators and governmental authorities.

It is the Company's practice to cooperate and comply with the requests for information and documents.

The Company is currently the subject of various regulatory reviews and investigations by federal and foreign regulators and SROs, including the SEC and the Financial Industry Regulatory Authority.

The Company is currently the subject of various regulatory reviews and investigations by state, federal and foreign regulators and SROs, including the SEC and the Financial Industry Regulatory Authority.

In some instances, these matters may result in a disciplinary action and/or a civil or administrative action.

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

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

The Company has fully reserved for the monetary penalty as of December 31, 2019 and anticipates paying the fine during the year ended December 31, 2020.

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

The Company has fully reserved for the monetary penalty as of December 31, 2020.

Representations and Warranties;

Indemnification Arrangements

In the normal course of its operations, the Company enters into contracts that contain a variety of representations and warranties in addition to indemnification obligations.

In the normal course of its operations, the Company enters into contracts that contain a variety of representations and warranties in addition to indemnification obligations, including indemnification obligations in connection with the Acquisition of KCG and the ITG Acquisition.

The Company's maximum exposure under these arrangements is currently unknown, as any such exposure could relate to claims not yet brought or events which have not yet occurred.

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The standard requires the recognition of ROU assets and lease liabilities for leases, which are defined as a contract, or part of a contract, that conveys the right to control the use of identified property, plant or equipment for a period of time in exchange for consideration.

The Company has elected the practical expedient which allows for leases with an initial

term of 12 months or less to be excluded from recognition on the Consolidated Statement of Financial Condition and for which lease expense is recognized on a straight-line basis over the lease term.

The Company has elected the practical expedient which allows for leases with an initial term of 12 months or less to be excluded from recognition on the Consolidated Statements of Financial Condition and for which lease expense is recognized on a straight-line basis over the lease term.

Topic 842 primarily affected the accounting treatment for operating lease agreements in which the Company is the lessee.

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The subleases have remaining terms of 1 to 11 years.

The Company recognizes sublease income on a straight-line basis over the term of the sublease within Other, net on the 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, which was based on the information available as of the initial transition date, January 1, 2019, in determining the present value of lease payments.

As part of its purchase price allocation related to the ITG Acquisition, the balances of ROU assets and lease liabilities for certain acquired ITG office space were adjusted to reflect their fair values as of the ITG Closing Date.

Additionally, the discount rate used to value the lease liabilities on the acquired leases was adjusted to the Company's incremental borrowing rate on its secured borrowings as of the ITG Closing Date.

See Note 3 “ITG Acquisition” for further information on the ITG Acquisition.

During the year ended December 31, 2019, the Company ceased use of certain office lease premises as part of its ongoing effort to consolidate office space.

For the year ended December 31, 2019, the Company recognized $ 66.5 million in Termination of office leases on the Consolidated Statement of Comprehensive Income, comprising $ 27.1 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.

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 Consolidated Statements 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

December 31, 2019

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

Operating leases

Operating lease right-of-use assets

Operating lease liabilities

Operating lease right-of-use assets Operating lease right-of-use assets $ 268,864 $ 314,526

Operating lease liabilities Operating lease liabilities 315,340 365,364

Finance leases

Property and equipment, at cost

Property, equipment, and capitalized software, net

Accumulated depreciation

Property, equipment, and capitalized software, net

Finance lease liabilities

Accounts payable, accrued expenses, and other liabilities

Property and equipment, at cost Property, equipment, and capitalized software, net 36,093 37,589

Accumulated depreciation Property, equipment, and capitalized software, net ( 24,585 ) ( 24,579 )

Finance lease liabilities Accounts payable, accrued expenses, and other liabilities 11,687 13,371

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

December 31, 2019

December 31, 2020 December 31, 2019

Weighted average remaining lease term

Operating leases

Finance leases

Operating leases 6.9 years 7.5 years

Finance leases 2.0 years 1.5 years

Weighted average discount rate

1 unchanged sentence

Finance leases 3.13 % 3.52 %

The components of lease expense were as follows:

The components of lease expense are as follows:

Years Ended December 31,

(in thousands) 2020 2019

Year Ended December 31, 2019

Operating lease cost:

Fixed $ 73,624 $ 72,714

Variable 8,532 8,333

Impairment of ROU Asset 6,003 27,104

Total Operating lease cost 88,159 108,151

Sublease income 16,437 12,590

Finance lease cost:

2 unchanged sentences

Total Finance lease cost 11,968 13,226

Sublease income

The Company recognized $ 9.6 million and $ 66.5 million during the years ended December 31, 2020 and 2019, respectively, in Termination of office leases on the Consolidated Statements of Comprehensive Income related to the abandonment and termination of certain lease premises as part of its ongoing effort to consolidate office space.

Termination of office leases consisted of $ 6.0 million of impairments of ROU assets and lease terminations, $ 3.0 million of write-offs of leasehold improvements and fixed assets and $ 0.6 million of dilapidation charges for the year ended December 31, 2020 and $ 27.1 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 for the year ended December 31, 2019.

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

(in thousands)

Operating Leases

Finance Leases

(in thousands) Operating Leases Finance Leases

2021 $ 74,590 $ 6,774

2022 67,979 4,035

2023 64,621 1,438

2024 35,393 —

2025 27,495 —

2026 and thereafter 114,873 —

2 unchanged sentences

Total lease liability $ 315,340 $ 11,687

Future lease payments under non-cancelable leases and sublease receipts as of December 31, 2018 are as follows:

Total minimum lease payments

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

(in thousands)

December 31, 2019

December 31, 2018

The following table provides a reconciliation of cash and cash equivalents together with restricted or segregated cash

as reported within the Consolidated Statements of Financial Condition to the sum of the same such amounts shown in the Consolidated Statements of Cash Flows.

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

Cash and cash equivalents $ 889,559 $ 732,164

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Shares of the Company’s common stock generally vote together as a single class on all matters submitted to a vote of the Company’s stockholders.

The Founder Member controls approximately 81.9 % of the combined voting power of our common stock as a result of its ownership of our Class C and Class D Common Stock

During the period prior to the Reorganization Transactions and IPO, Class A-2 profits interests and Class B interests in Virtu Financial were issued to Employee Holdco (as defined below) on behalf of certain key employees and stakeholders.

4 unchanged sentences

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

On April 23, 2020, the Company’s Board of Directors adopted an amendment to the Company’s Amended and Restated 2015 Management Incentive Plan in order to increase the number of shares of the Company’s Class A Common Stock reserved for issuance, and in respect of which awards may be granted under the Amended and Restated 2015 Plan from 16,000,000 shares of Class A Common Stock to an aggregate of 21,000,000 shares of Class A Common Stock, and the amendment was approved by the Company’s shareholders at the Company's annual meeting of stockholders on June 5, 2020.

On November 13, 2020, the Company amended its form award agreement for the issuance of RSUs to provide for the continued vesting of outstanding RSU awards upon the occurrence of a qualified retirement (the "RSU Amendment").

A qualified retirement generally means a voluntary resignation by the Participant (i) after five years of service, (ii) the participant attaining the age of 50 and (iii) the sum of the participant's age and service at the time of termination equaling or exceeding 65.

Continued vesting is subject to the participant entering into a 2 year non-compete.

The amendment was authorized and approved by the Compensation Committee of the Company's Board of Directors.

As a result of the amendment, currently issued and outstanding RSUs held by the Company's employees, including its executive officers, shall be deemed to be subject to the amended terms of the form award agreement, and any future RSU awards shall also be governed by such amended terms.

Amended and Restated Investment Technology Group, Inc.

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Acquisition of KCG

On the KCG Closing Date, the Company completed the all-cash Acquisition of KCG.

In connection with the Acquisition of KCG, the Company issued 8,012,821 shares of the Company’s Class A Common Stock to Aranda Investments Pte.

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

The investment agreements are filed as exhibits to the Company’s 2018 Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 1, 2019.

Share Repurchase Program

In February 2018, the Company's board of directors authorized a new share repurchase program of up to $ 50.0 million in Class A Common Stock and Virtu Financial Units by March 31, 2019.

In February 2018, the Company's Board of Directors authorized a share repurchase program of up to $ 50.0 million in Class A Common Stock and Virtu Financial Units by March 31, 2019.

On July 27, 2018, the Company's Board of Directors authorized the expansion of the Company's share repurchase program, increasing the total authorized amount by $ 50.0 million to $ 100.0 million and extending the duration of the program through September 30, 2019.

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From the inception of the program in February 2018, the Company repurchased approximately 2.6 million shares of Class A Common Stock and Virtu Financial Units for approximately $ 65.9 million.

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.

From the inception of the program through December 31, 2020, the Company repurchased approximately 1.4 million shares of Class A Common Stock and Virtu Financial Units for approximately $ 33.9 million.

As of December 31, 2020, the Company has approximately of $ 66.1 million remaining capacity for future purchases of shares of Class A Common Stock and Virtu Financial Units under the program.

Secondary Offerings

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During the years ended December 31, 2020, 2019 and 2018, 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 2,660,239 , 840,839 and 3,919,462 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 62.2 % interest in Virtu Financial at December 31, 2019 .

The Company holds approximately a 64.1 % interest in Virtu Financial at December 31, 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 11 "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.

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 11 "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 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.

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 Consolidated Statements of Financial Condition and as an increase to Additional paid-in capital on the Consolidated Statements of Changes in Equity.

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 Consolidated Statements of Comprehensive Income.

Accumulated Other Comprehensive Income (Loss)

The following table presents the changes in Other Comprehensive Income (Loss) for the years ended December 31, 2020, 2019 and 2018:

Year Ended December 31, 2020

(in thousands) AOCI Beginning Balance Amounts recorded

in AOCI Amounts reclassified from AOCI to income AOCI Ending Balance

Net change in unrealized cash flow hedges gains (losses) (1) $ — $ ( 42,636 ) $ 9,192 $ ( 33,444 )

Foreign exchange translation adjustment ( 647 ) 8,604 — 7,957

Total $ ( 647 ) $ ( 34,032 ) $ 9,192 $ ( 25,487 )

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

As of December 31, 2020, the Company expects approximately $ 13.4 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.

Year Ended December 31, 2019

(in thousands) AOCI Beginning Balance Amounts recorded

in AOCI Amounts reclassified from AOCI to income AOCI Ending Balance

Foreign exchange translation adjustment $ ( 82 ) $ ( 565 ) $ — $ ( 647 )

Total $ ( 82 ) $ ( 565 ) $ — $ ( 647 )

Year Ended December 31, 2018

(in thousands) AOCI Beginning Balance Amounts recorded

in AOCI Amounts reclassified from AOCI to income AOCI Ending Balance

Foreign exchange translation adjustment $ 2,991 $ ( 3,073 ) $ — $ ( 82 )

Total $ 2,991 $ ( 3,073 ) $ — $ ( 82 )

Share-based Compensation

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The following table summarizes activity related to stock options for the years ended December 31, 2020, 2019 and 2018:

Options Outstanding

Options Exercisable

Number of Options

Weighted Average Exercise Price Per Share

Weighted Average Remaining Contractual Life

Number of Options

Weighted Average Exercise Price

Options Outstanding Options Exercisable

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

At December 31, 2017 7,738,000 $ 19.00 7.29 3,869,000 $ 19.00

Granted — — — — —

Exercised ( 4,168,100 ) 19.00 — — 19.00

Forfeited or expired ( 83,750 ) — — — —

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

Granted 156,129 13.60 4.37 156,129 13.60

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

Forfeited or expired ( 55,000 ) — — — —

At December 31, 2019 3,233,779 $ 18.74 5.24 3,248,779 $ 18.74

Granted — — — — —

Exercised ( 909,627 ) 18.07 — ( 909,627 ) 18.07

Forfeited or expired — — — — —

At December 31, 2020 2,324,152 $ 19.00 4.24 2,324,152 $ 19.00

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

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

The risk-free interest rate was determined based on the yields available on U.S.

2 unchanged sentences

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

The Company recognized $ 1.4 million , $ 5.8 million , and $ 5.2 million for the years ended December 31, 2019 , 2018 and 2017, respectively, of compensation expense in relation to the stock options issued and outstanding.

As of December 31, 2019 the stock options to purchase shares of Class A Common Stock were fully vested.

As of December 31, 2018 , total unrecognized share-based compensation expense related to unvested stock options was $ 1.6 million , and the amount was to be recognized over a weighted average period of 0.3 years .

The Company recognized $ 1.4 million and $ 5.8 million for the years ended December 31, 2019 and 2018, respectively, 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 year ended December 31, 2020.

Amended and Restated Investment Technology Group, Inc.

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

Class A Common Stock and Restricted Stock Units

Pursuant to the Amended and Restated 2015 Management Incentive Plan as described in Note 18 “Capital Structure” , subsequent to the IPO, shares of immediately vested Class A Common Stock and restricted stock units were granted, with the latter vesting over a period of up to 4 years .

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

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

Pursuant to the Amended and Restated 2015 Management Incentive Plan as described in Note 19 "Capital Structure", subsequent to the IPO, shares of immediately vested Class A Common Stock, RSUs and RSAs were granted, with RSUs and RSAs vesting over a period of up to 4 years.

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

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

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

For the years ended December 31, 2020, 2019 and 2018, respectively, there were 967,526 , 441,920 and 594,536 shares of immediately vested Class A Common Stock granted as part of year-end compensation.

In addition, the Company accrued compensation expense of $ 12.6 million , $ 11.2 million and $ 11.0 million for the years ended December 31, 2019 and 2018 and 2017, 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 Consolidated Statements of Comprehensive Income and Accounts payable, accrued expenses and other liabilities on the Consolidated Statements of Financial Condition.

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

Number of Shares

In addition, the Company accrued compensation expense of $ 25.2 million, of which $ 2.1 million was related to accelerated vesting of awards for retirement eligible employees, $ 12.6 million and $ 11.2 million for the years ended December 31, 2020, 2019 and 2018, 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 Consolidated Statements of Comprehensive Income and Accounts payable, accrued expenses and other liabilities on the Consolidated Statements of Financial Condition.

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

Number of RSUs and RSAs Weighted

Average Fair Value

At December 31, 2017 853,047 $ 17.94

Forfeited or expired

Granted 1,265,899 20.89

Forfeited ( 127,493 ) 18.30

Vested ( 612,531 ) 18.76

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

Granted 4,063,541 25.07

Forfeited ( 643,709 ) 21.58

Vested ( 1,805,265 ) 24.08

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

Granted (1) 3,318,169 17.49

Forfeited ( 430,961 ) 17.45

Vested ( 2,487,613 ) 20.17

At December 31, 2020 3,393,084 $ 21.35

The Company recognized $ 66.1 million , $ 17.9 million , and $ 9.9 million for the years ended December 31, 2019 , 2018 and 2017, respectively, of compensation expense in relation to the restricted stock units.

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

The Company recognized $ 37.4 million, of which $ 3.7 million was related to accelerated vesting of awards for retirement eligible employees, $ 66.1 million and $ 17.9 million for the years ended December 31, 2020, 2019 and 2018, respectively, of compensation expense in relation to the RSUs.

As of December 31, 2020 and December 31, 2019, total unrecognized share-based compensation expense related to unvested RSUs was $ 37.1 million and $ 43.4 million, respectively, and this amount is to be recognized over a weighted average period of 1.03 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.

On November 13, 2020, the Company adopted the Virtu Financial, Inc.

Deferred Compensation Plan (the "DCP").

The DCP permits eligible executive officers and other employees to defer cash or equity based compensation beginning in the calendar year ending December 31, 2021, subject to certain limitations and restrictions.

Deferrals may also be directed to notional investments in certain of the employee investment opportunities.

No amounts have been recognized as compensation cost under the DCP as of December 31, 2020.

Property, Equipment and Capitalized Software

Property, equipment and capitalized software consisted of the following at December 31, 2020 and December 31, 2019:

(in thousands)

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

Capitalized software costs $ 183,208 $ 143,748

1 unchanged sentence

Furniture and equipment 332,249 357,589

Total 569,551 573,318

Accumulated depreciation and amortization ( 455,961 ) ( 457,229 )

1 unchanged sentence

Depreciation expense for property and equipment for the years ended December 31, 2020, 2019, and 2018 was approximately $ 37.4 million, $ 44.7 million, and $ 48.4 million, respectively, and is included within depreciation and amortization expense in the Consolidated Statements of Comprehensive Income.

The Company’s capitalized software development costs excluding the compensation charges recognized in relation to the IPO disclosed below were approximately $ 32.5 million , $ 24.4 million , and $ 15.7 million for the years ended December 31, 2019 , 2018 , and 2017 , respectively.

The Company’s capitalized software development costs were approximately $ 37.0 million, $ 32.5 million, and $ 24.4 million for the years ended December 31, 2020, 2019, and 2018, respectively.

The related amortization expense was approximately $ 29.3 million, $ 21.0 million, and $ 20.4 million for the years ended December 31, 2020, 2019, and 2018, respectively, and is included within Depreciation and amortization in the Consolidated Statements of Comprehensive Income.

Additionally, in connection with the compensation charges related to non-voting interest units (formerly Class B interests) recognized upon the IPO, the Company continuously capitalized the vesting of the interest units through December 31, 2017 as the non-voting interest units were fully vested.

The Company capitalized approximately $ 0.04 million for the year ended December 31, 2017.

The amortization costs related to these capitalized compensation charges and previously capitalized compensation charges related to the Class B interests of Virtu East MIP LLC and the Class B interests of Virtu Financial were approximately $ 0.02 million , and $ 0.1 million for the years ended December 31, 2018 and 2017 , respectively.

Regulatory Requirement

As of December 31, 2019 and December 31, 2018 , U.S.

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

broker-dealers as detailed in the table below.

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 December 31, 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 December 31, 2019 were as follows:

(in thousands)

Regulatory Capital

Regulatory Capital Requirement

Excess Regulatory Capital

VAL's regulatory capital and regulatory capital requirements as of December 31, 2020 was as follows:

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

Virtu Americas LLC $ 621,253 $ 2,917 $ 618,336

Virtu Financial BD LLC

Virtu Financial Capital Markets LLC

Virtu ITG LLC

Virtu Alternet Securities LLC

As of December 31, 2020, VAL had $ 96.2 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 $ 20.4 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 transferred to VAL upon consolidation of the broker dealers.

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

The regulatory capital and regulatory capital requirements of the U.S.

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

(in thousands)

Regulatory Capital

Regulatory Capital Requirement

Excess Regulatory Capital

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

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

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Virtu Financial Capital Markets LLC 3,710 1,000 2,710

Virtu ITG LLC 66,069 1,000 65,069

Virtu Alternet Securities LLC 1,931 100 1,831

As of December 31, 2019, VAL and VITG had $ 22.3 million and $ 7.4 million, respectively, of cash in special reserve bank accounts for the benefit of customers pursuant to SEC Rule 15c3-3, Computation for Determination of Reserve Requirements, and $ 4.5 million and $ 5.0 million, respectively, of cash in reserve bank accounts for the benefit of proprietary accounts of brokers.

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

Foreign Subsidiaries

1 unchanged sentence

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

The regulatory net capital balances and regulatory capital requirements applicable to these subsidiaries as of December 31, 2019 were as follows:

(in thousands)

Regulatory Capital

Regulatory Capital Requirement

Excess Regulatory Capital

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

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

Virtu ITG Canada Corp $ 12,944 $ 196 $ 12,748

Virtu Financial Canada ULC 2,486 196 2,290

Virtu ITG Europe Limited 57,459 32,106 25,353

Virtu Financial Ireland Limited 94,528 41,038 53,490

United Kingdom

Virtu ITG UK Limited 1,290 910 380

Virtu ITG Australia Limited 30,606 12,729 17,877

Virtu ITG Hong Kong Limited 4,290 625 3,665

Virtu ITG Singapore Pte Limited 796 76 720

As of December 31, 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:

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

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

TriAct Canada Marketplace LP 2,538 193 2,345

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The Company operates its business in the U.S.

and internationally, primarily in Europe and Asia.

and internationally, primarily in Europe, Asia and Canada.

Significant transactions and balances between geographic regions occur primarily as a result of certain of the Company’s subsidiaries incurring operating expenses such as employee compensation, communications and data processing and other overhead costs, for the purpose of providing execution, clearing and other support services to affiliates.

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United States $ 2,569,147 $ 1,133,514 $ 1,644,641

Ireland 323,519 188,154 81,531

Singapore 176,665 109,761 136,161

Canada 116,521 49,666 —

Australia 44,552 34,933 —

United Kingdom 4,218 ( 1,735 ) 15,681

Others 4,709 3,199 704

Total revenues $ 3,239,331 $ 1,517,492 $ 1,878,718

(1) Includes $ 337.6 million gain on sale of BondPoint for the year ended December 31, 2018 and $ 86.6 million gain on the reduction of the Company's tax receivable agreement obligation as a result of the decrease in the U.S.

corporate income tax rate for the year ended December 31, 2017.

The Company has two operating segments:

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

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

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

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

in addition, the Company will commit capital on behalf of clients as needed.

Agency-based, execution-only trading in the segment is done primarily through a variety of access points including:

Client-based, execution-only trading in the segment is done primarily through a variety of access points including:

(i) algorithmic trading and order routing in global equities and options;

(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 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.

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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 years ended December 31, 2019 , 2018 and 2017 are summarized in the following table:

(in thousands)

The Company’s total revenues and income before income taxes and noncontrolling interest (“Pre-tax earnings”) by segment for the years ended December 31, 2020, 2019 and 2018 and are summarized in the following table:

(in thousands) Market Making Execution Services Corporate Consolidated Total

Total revenue $ 2,593,342 $ 650,143 $ ( 4,154 ) $ 3,239,331

Income before income taxes and noncontrolling interest

Income (loss) before income taxes and noncontrolling interest 1,241,313 174,617 ( 33,093 ) 1,382,837

Total revenue 1,028,094 491,736 ( 2,338 ) 1,517,492

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

As of December 31, 2019 , and December 31, 2018 the Company had a net receivable from its affiliates of $ 1.3 million and a net payable to its affiliates of $ 3.0 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 $ 12.9 million , $ 9.5 million and $ 6.0 million for the years ended December 31, 2019 , 2018 and 2017, respectively, to SBI for these trading activities.

As of December 31, 2020, and December 31, 2019, the Company had a net receivable from its affiliates of $ 2.3 million and a net receivable from its affiliates of $ 1.3 million, respectively.

The Company has held a minority interest in JNX since 2016 (see Note 12 "Financial Assets and Liabilities").

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

The Company paid $ 16.7 million, $ 12.9 million and $ 9.5 million for the years ended December 31, 2020, 2019 and 2018, respectively, to JNX 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 Consolidated Statements of Comprehensive Income.

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The Company paid $ 1.5 million, $ 1.5 million and $ 1.5 million for the years ended December 31, 2020, 2019 and 2018, respectively, to Level 3 for these services.

Subsequent to the ITG Acquisition, the Company makes commission-sharing arrangement (“CSA”) payments to affiliates of DBS Group Holdings (“DBS”).

Subsequent to the ITG Acquisition, the Company makes commission-sharing arrangement payments to affiliates of DBS Group Holdings (“DBS”).

Temasek and its affiliates have a significant ownership interest in DBS.

The Company made payments of $ 0.1 million to DBS for the year ended December 31, 2019.

The Company paid $ 0.2 million and $ 0.1 million to DBS for the years ended December 31, 2020 and 2019, respectively.

The Company did not make payments to DBS for the year ended December 31, 2018.

In May 2019, the Company completed 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, the Company’s founding equity holder, pursuant to that certain Member Purchase Agreement, entered into on May 14, 2019 by and between the Company and TJMT Holdings LLC.

As described in Note 11 "Borrowings" and Note 19 "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.

Parent Company

VFI is the sole managing member of Virtu Financial, which guarantees the indebtedness of its direct subsidiary under the First Lien Term Loan Facility (see Note 11 "Borrowings").

VFI is limited to its ability to receive distributions (including for purposes of paying corporate and other overhead expenses and dividends) from Virtu Financial under the Credit Agreement.

VFI is limited to its ability to receive distributions (including for purposes of paying corporate and other overhead expenses and dividends) from Virtu Financial under the Credit

The following financial statements (the “Parent Company Only Financial Statements”) should be read in conjunction with the consolidated financial statements of the Company and the foregoing.

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Condensed Statements of Financial Condition

As of December 31,

(In thousands except interest data)

(In thousands except interest data) December 31, 2020 December 31, 2019

Cash $ 71,481 $ 4,650

Deferred tax asset 183,549 197,792

Investment in subsidiary 3,126,502 2,689,026

Other assets 82,917 33,653

Total assets $ 3,464,449 $ 2,925,121

Liabilities, redeemable membership interest and equity

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Condensed Statements of Comprehensive Income

For the Years Ended

Years Ended December 31,

(in thousands) 2020 2019 2018

Other Income $ — $ — $ —

Operating Expenses:

6 unchanged sentences

Foreign currency translation adjustment, net of taxes 8,604 ( 565 ) ( 3,073 )

Net change in unrealized cash flow hedges gains (losses), net of taxes ( 33,444 ) — —

Comprehensive income (loss) $ 1,096,073 $ ( 29,984 ) $ 617,119

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Condensed Statements of Cash Flows

For the Years Ended

Years Ended December 31,

(in thousands) 2020 2019 2018

Cash flows from operating activities

Net income $ 1,120,913 $ ( 29,419 ) $ 620,192

Adjustments to reconcile net income to net cash provided by operating activities:

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Changes in operating assets and liabilities:

Net cash provided by (used in) operating activities

( 48,566 ) 2,339 ( 25,268 )

Net cash provided by operating activities 557,767 156,512 303,714

Cash flows from investing activities

Acquisition of KCG, net of cash acquired, described in Note 3

Investments in subsidiaries, equity basis 56,629 70,762 34,909

Net cash provided by (used in) investing activities

Net cash provided by investing activities 56,629 70,762 34,909

Cash flows from financing activities

Distribution from Virtu Financial to non-controlling interest ( 363,919 ) ( 99,221 ) ( 206,903 )

Payments on repurchase of non-voting common interest

Dividends ( 120,496 ) ( 112,414 ) ( 100,329 )

Repurchase of Class C common stock — ( 196 ) ( 8,216 )

1 unchanged sentence

Tax receivable agreement obligations ( 13,286 ) — ( 12,359 )

Issuance of common stock, net of offering costs

Issuance of common stock in connection with secondary offering, net of offering costs — ( 375 ) ( 950 )

Net cash provided by (used in) financing activities

Net cash used in financing activities ( 547,565 ) ( 226,465 ) ( 394,975 )

Net increase (decrease) in Cash 66,831 809 ( 56,352 )

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Supplemental disclosure of cash flow information:

Taxes paid $ 203,031 $ 1,332 $ 73,991

Non-cash financing activities

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The Company has evaluated subsequent events for adjustment to or disclosure in its consolidated financial statements through the date of this report, and has not identified any recordable or disclosable events, not otherwise reported in these consolidated financial statements or the notes thereto, except for the following:

On February 11, 2020, the Company’s board of directors declared a dividend of $ 0.24 per share of Class A Common Stock and Class B Common Stock and per participating Restricted Stock Unit that will be paid on March 16, 2020 to holders of record as of March 2, 2020.

On January 29, 2020, the Company entered into a five-year $ 1,000 million floating to fixed interest rate swap agreement that effectively fixes interest payment obligations on $ 1,000 million of principal under the First Lien Term Loan Facility at 4.9 % through January 2025.

On February 10, 2020, the Company announced a repricing amendment (“Amendment No.

2”) to its Credit Agreement to decrease the applicable interest rate by 0.5 % .

This amendment is expected to close on or about March 2, 2020, subject to the satisfaction of customary closing conditions.

Following such closing, the applicable borrowing rates for term loan borrowings and revolver borrowings under the Credit Agreement will bear interest at a per annum rate equal to, at the Company's election, either (i) the greatest of (a) the prime rate in effect, (b) the greater of (1) the federal funds effective rate and (2) the overnight bank funding rate, in each case plus 0.5 % , (c) an adjusted LIBOR rate for a Eurodollar borrowing with an interest period of one month plus 1 % and (d) 1.00 % , plus, in each case, 2.00 % , or (ii) the greater of (x) an adjusted LIBOR rate for the interest period in effect and (y) 0 % , plus, in each case, 3.00 % .

The lower interest rate resulting from Amendment No.

2, when consummated, in combination with the interest rate swaps entered into on January 29, 2020 and on October 9, 2019 will result in a blended fixed rate of 4.367 % on $ 1,525 million of the First Lien Term Loan Facility debt for approximately five years .

The remaining $ 400 million of the First Lien Term Loan Facility debt will remain floating and pegged to LIBOR, but at a reduced spread.

SUPPLEMENTAL FINANCIAL INFORMATION

Consolidated Quarterly Results of Operations (Unaudited)

For the Three Months Ended

(in thousands, except share and per share data)

March 31, 2019

June 30, 2019

September 30, 2019

December 31, 2019

Total revenue

Total operating expenses

Operating income

net income attributable to noncontrolling interests

Net income attributable to Virtu Financial, Inc.

Net income per share of common stock:

For the Three Months Ended

(in thousands, except share and per share data)

March 31, 2018

June 30, 2018

September 30, 2018

December 31, 2018

Total revenue

Total operating expenses

Operating income (loss)

Net income (loss)

net income (loss) attributable to noncontrolling interests

Net income (loss) attributable to Virtu Financial, Inc.

Net income per share of common stock:

On February 11, 2021, 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 March 15, 2021 to holders of record as of March 1, 2021.

On February 11, 2021, the Company's Board of Directors authorized the expansion of the Company's current share repurchase program, increasing the total authorized amount by $ 70.0 million to $ 170.0 million.

Since inception of the program through February 11, 2021, the Company repurchased approximately 2.1 million shares of Class A Common Stock and Virtu Financial Units for approximately $ 49.9 million.

As of February 11, 2021, the Company has approximately $ 120 million remaining capacity for future purchases of shares of Class A Common Stock and Virtu Financial Units under the program.

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

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-K

Item 8. Financial Statements and Supplementary Data