BGC Group, Inc.: Form 10-Q for the period ended Jun 30, 2024

The following discussion of our financial condition and results of operations should be read together with our unaudited Condensed Consolidated Financial Statements and notes to those statements, as well as the cautionary statements relating to forward-looking statements included in this report.

The objective of this Management’s Discussion and Analysis is to allow investors to view the Company from management’s perspective, considering items that have had and could have a material impact on future operations. This discussion summarizes the significant factors affecting our results of operations and financial condition as of and during the three and six months ended June 30, 2024 and 2023. This discussion is provided to increase the understanding of, and should be read in conjunction with, our unaudited Condensed Consolidated Financial Statements and the notes thereto included elsewhere in this report.

OVERVIEW AND BUSINESS ENVIRONMENT

We are a leading global marketplace, data, and financial technology services company for a broad range of products, including fixed income, foreign exchange, energy, commodities, shipping, and equities.

BGC, through its affiliates, specializes in the trade execution of a broad range of products, including fixed income securities such as government bonds, corporate bonds, and other debt instruments, as well as related interest rate derivatives and credit derivatives. Additionally, we provide brokerage services across FX, Equities, ECS, and Futures and Options. Our businesses also provide connectivity and network solutions, clearing, market data and network connectivity products, trade compression and other post-trade services, market data and related information services and other back-office services to a broad assortment of financial and non-financial institutions.

Our integrated platform is designed to provide flexibility to customers with regard to price discovery, trade execution and transaction processing, as well as accessing liquidity through our platforms, for transactions executed either OTC or through an exchange. Through our electronic brands, we offer several trade execution, market infrastructure and connectivity services, as well as post-trade services.

Our clients include many of the world’s largest banks, broker-dealers, investment banks, trading firms, hedge funds, governments, corporations, and investment firms. BGC is a global operation with offices across all major geographies, including New York and London, as well as in Bahrain, Beijing, Bogota, Brisbane, Cape Town, Chicago, Copenhagen, Dubai, Dublin, Frankfurt, Geneva, Hong Kong, Houston, Johannesburg, Madrid, Manila, Melbourne, Mexico City, Miami, Milan, Monaco, Nyon, Paris, Perth, Rio de Janeiro, Santiago, São Paulo, Seoul, Shanghai, Singapore, Sydney, Tel Aviv, Tokyo, Toronto, and Zurich.

As of June 30, 2024, we had 2,122 brokers, salespeople, managers, technology professionals and other front-office personnel across our businesses.

Corporate Conversion

On July 1, 2023, the Company completed its Corporate Conversion to a Full C-Corporation in order to reorganize and simplify its organizational structure. As a result of the Corporate Conversion, BGC Group became the public holding company for, and successor to, BGC Partners, and its Class A common stock began trading on Nasdaq, in place of BGC Partners’ Class A common stock, under the ticker symbol “BGC.” Upon completion of the Corporate Conversion, the former stockholders of BGC Partners and the former limited partners of BGC Holdings now participate in the economics of the BGC businesses through BGC Group.

Effective as of 12:01 a.m., Eastern Time, on July 1, 2023, BGC Holdings reorganized from a Delaware limited partnership into a Delaware limited liability company through a merger with and into Holdings Merger Sub, with Holdings Merger Sub continuing as a direct subsidiary of BGC Partners. Effective as of 12:02 a.m., Eastern Time, on July 1, 2023, Merger Sub 1 merged with and into BGC Partners, with BGC Partners continuing as a direct subsidiary of BGC Group. At the same time, Merger Sub 2 merged with and into Holdings Merger Sub, with Holdings Merger Sub continuing as a subsidiary of BGC Group. As a result of the Corporate Conversion Mergers, BGC Partners and BGC Holdings became wholly owned subsidiaries of BGC Group.

In the Holdings Reorganization Merger, each unit of BGC Holdings outstanding as of immediately prior to the Holdings Reorganization Merger was converted into a substantially equivalent equity interest in Holdings Merger Sub.

In the Corporate Merger, each share of Class A common stock, par value $0.01 per share, of BGC Partners and each share of Class B common stock, par value $0.01 per share, of BGC Partners outstanding was converted into one share of Class

A common stock, par value $0.01 per share, of BGC Group and one share of Class B common stock, par value $0.01 per share, of BGC Group, respectively.

In connection with, but prior to the Corporate Conversion, the Company completed various transactions which included:

• the redemption of certain non-exchangeable limited partnership units in connection with the issuance of shares of BGC Partners Class A common stock and the accompanying tax payments, which led to an equity-based compensation charge of $60.9 million;
• the exchange of the remaining 1.5 million exchangeable limited partnership units of BGC Holdings held by employees on June 30, 2023, for 1.0 million shares, after tax withholding, of BGC Partners Class A common stock;
• the redemption of certain non-exchangeable limited partnership units of BGC Holdings held by employees and issuance of 16.9 million BGC Partners RSUs on a one-for-one basis on June 30, 2023;
• the redemption of certain non-exchangeable Preferred Units of BGC Holdings held by employees and issuance of $49.2 million of BGC Partners RSU Tax Accounts on June 30, 2023, based on the fixed cash value of the Preferred Units redeemed;
• the redemption of the remaining 5.6 million non-exchangeable FPUs and issuances of BGC Partners RSUs on a one-for-one basis on June 30, 2023, which in turn reduced the “Redeemable Partnership Interest” to zero with an offsetting impact to “Total equity” in the Company’s unaudited Condensed Consolidated Statements of Financial Condition as of June 30, 2023; and
• the purchase on June 30, 2023 by Cantor from BGC Holdings of an aggregate of 5,425,209 Cantor units for an aggregate consideration of $9,715,772 as a result of the redemption of 5,425,209 FPUs, and 324,223 Cantor units for an aggregate consideration of $598,712 as a result of the exchange of 324,223 FPUs.

As a result of the Corporate Conversion:

• 64.0 million Cantor units, including 5.7 million purchased on June 30, 2023, were converted into shares of BGC Group Class B common stock, subject to the terms and conditions of the Corporate Conversion Agreement, provided that a portion of the 64.0 million shares of BGC Group Class B common stock issued to Cantor will exchange into BGC Group Class A common stock in the event that BGC Group does not issue at least $75,000,000 in shares of BGC Group Class A or B common stock in connection with certain acquisition transactions prior to July 1, 2030, the seventh anniversary of the Corporate Conversion;
• BGC Group assumed all BGC Partners RSUs, RSU Tax Accounts or restricted stock awards outstanding as of June 30, 2023; and
• non-exchangeable limited partnership units of BGC Holdings were converted into equity awards denominated in cash, restricted stock and/or RSUs of BGC Group, each as further set forth in the Corporate Conversion Agreement. BGC Group granted 38.6 million restricted stock awards, 25.3 million RSUs, and $74.0 million of RSU Tax Accounts upon the conversion of the non-exchangeable shares of Holdings Merger Sub.

There were no limited partnership units of BGC Holdings remaining after the Corporate Conversion was completed.

In connection with the Corporate Conversion on July 1, 2023, the BGC Group Board and the Board of Directors of BGC Partners authorized the assumption of all agreements and arrangements between BGC Partners and any executive officer, director or affiliate of BGC Partners, with such modifications necessary to reflect the Corporate Conversion. Pursuant to the foregoing authorization, any existing agreements and arrangements between BGC Partners and any executive officer, director or affiliate of BGC Partners, were generally assumed unchanged, other than making BGC Group a party thereto.

In connection with the Corporate Conversion on July 1, 2023, the Board and Audit Committee of BGC Group approved the authorized repurchases of Company Equity Securities from any holder of Company Equity Securities, including our directors, officers, and employees, of up to $400.0 million.

In connection with the Corporate Conversion on July 1, 2023, the Board and Audit Committee of BGC Group approved the authorized repurchases of Company Debt Securities from any holder of Company Debt Securities, including our directors, officers, and employees, of up to $50.0 million.

In connection with the Corporate Conversion on July 1, 2023, BGC Group assumed and adopted: the Eighth Amended and Restated BGC Partners, Inc. Long-Term Incentive Plan, as amended and restated as the BGC Group, Inc. Long Term Incentive Plan; the BGC Partners Second Amended and Restated BGC Partners Incentive Bonus Compensation Plan, as amended and restated, and renamed the BGC Group, Inc. Incentive Bonus Compensation Plan; and the BGC Partners, Inc. Deferral Plan for Employees of BGC Partners, Inc., Cantor Fitzgerald, L.P. and Their Affiliates, as amended and restated as the BGC Group, Inc. Deferral Plan for Employees of BGC Group, Inc., Cantor Fitzgerald, L.P. and Their Affiliates. The BGC Group Equity Plan provides for a maximum of 600 million shares of BGC Class A common stock that may be delivered or cash settled pursuant to the exercise or settlement of awards granted under the plan.

In connection with the Corporate Conversion on July 1, 2023, the BGC Holdings Limited Partnership Agreement was terminated, and the BGC Holdings, L.P. Participation Plan was terminated.

In connection with the Corporate Conversion on July 1, 2023, BGC Group amended and restated its certificate of incorporation to reflect an increase in the authorized shares of BGC Group Class A common stock to 1,500,000,000; an increase in the authorized shares of BGC Group Class B common stock to 300,000,000; and a provision providing for exculpation to officers of BGC Group pursuant to Section 102(b)(7) of the DGCL. Additionally, BGC Group amended and restated its bylaws to adopt a provision providing that Delaware courts shall be the exclusive forum for certain matters.

In connection with the Corporate Conversion on July 1, 2023, the Exchange Agreement with Cantor terminated based on its own terms.

In connection with the Corporate Conversion on July 1, 2023, BGC Group, Cantor and certain affiliates of Cantor entered into an Amended and Restated U.S. Master Administrative Services Agreement and an Amended and Restated U.K. Master Administrative Services Agreement.

FMX

FMX includes the world’s fastest growing cash U.S. Treasuries marketplace, FMX UST, and its spot Foreign Exchange platform, FMX FX, along with its fully approved U.S. interest rate futures exchange. FMX is challenging the CME’s leading position in U.S. interest rate futures, cash U.S. Treasuries and spot Foreign Exchange.

In January 2024, FMX received CFTC approval to operate an exchange for U.S. interest rate futures products, the largest and most widely traded futures contracts in the world.

The FMX Equity Partners contributed $171.7 million between April 23, 2024 and April 24, 2024 into FMX in exchange for a 25.75% ownership interest at a post-money equity valuation of $666.7 million. The FMX Equity Partners received an additional 10.3% of equity ownership subject to driving trading volumes and meeting certain volume targets across the FMX ecosystem.

FMX Futures will compete in the world’s most valuable and widely traded market -- U.S. interest rate futures. FMX is scheduled to launch SOFR futures in September 2024 with U.S. treasury futures launching in early 2025.

FMX Futures will provide clients with significant capital savings through its clearing partnership with LCH. LCH is a fully approved CFTC Derivatives Clearing Organization and is the world’s largest clearer of interest rate swaps, with approximately 98 percent market share of cleared U.S. dollar interest rate swaps.1

FMX clients will receive cross-margin capital savings on both their FMX futures positions and the $225 billion1 of LCH cleared interest rate swap collateral supporting $53.3 trillion of US dollar swaps cleared by LCH in the second quarter. SOFR futures are near-perfect offsets for interest rate swaps and FMX SOFR futures will produce enormous cross-margin efficiencies, against the much larger LCH collateral pool, to which its peer does not have access. FMX expects its cross-margin efficiencies to be many multiples of what is available at the competing offering today.

Fenics

For the purposes of this document and subsequent SEC filings, all of our higher margin, technology-driven businesses are referred to as Fenics. We categorize our Fenics businesses as Fenics Markets and Fenics Growth Platforms. Fenics Markets includes the Fully Electronic portion of BGC’s brokerage businesses, data, network and post-trade revenues that are unrelated to Fenics Growth Platforms, as well as Fenics Integrated revenues. Fenics Growth Platforms includes FMX UST, Fenics GO, Lucera, FMX FX, PortfolioMatch and other newer standalone platforms. Revenues generated from data, network and post-trade attributable to Fenics Growth Platforms are included within their related businesses.

1 Source: Clarus Financial Technology. Cleared interest rate swap collateral data as of 3/29/2024.

Historically, technology-based product growth has led to higher margins and greater profits over time for exchanges and wholesale financial intermediaries alike, even if overall Company revenues remain consistent. This is largely because automated and electronic trading efficiency allows the same number of employees to manage a greater volume of trades as the marginal cost of incremental trading activity falls. Over time, the conversion of exchange-traded and OTC markets to Fully Electronic trading has also typically led to an increase in volumes which offset lower commissions, and often lead to similar or higher overall revenues. We have been a pioneer in creating and encouraging Hybrid and Fully Electronic execution, and continually work with our customers to expand such trading across more asset classes and geographies.

These electronic markets for OTC products have grown as a percentage of overall industry volumes over the past decade as firms like BGC have invested in the kinds of technology favored by our customers. Regulation across banking, capital markets, and OTC derivatives has accelerated the adoption of Fully Electronic execution, and we expect this demand to continue. We also believe that new clients, beyond our large bank customer base, will primarily transact electronically across our Fenics platforms.

The combination of wider adoption of Hybrid and Fully Electronic execution and our competitive advantage in terms of technology and experience has contributed to our strong growth in electronically traded products. We continue to invest in our high-growth, high-margin, technology-driven businesses, including our standalone Fully Electronic Fenics Growth Platforms. Fenics has exhibited strong growth over the past several years, and we believe that this growth has outpaced the wholesale brokerage industry. We expect this trend to accelerate as we continue to convert more of our Voice/Hybrid execution into higher-margin, technology-driven execution across our Fenics platforms and continue to grow our Fenics Growth Platforms.

We expect to benefit from the trend towards electronic trading, increased demand for market data, and the need for increased connectivity, automation, and post-trade services. We continue to onboard new customers as the opportunities created by electronic and algorithmic trading continue to transform our industry. We continue to roll out our next-generation Fenics execution platforms across more products and geographies with the goal of seamlessly integrating the liquidity of Voice transactions with customer electronic orders either by a GUI, API, or web-based interface.

Revenues in our Fenics businesses increased 9.7%, to $137.3 million, and 8.0%, to $286.6 million, for the three and six months ended June 30, 2024, respectively, as compared to the prior year periods.

Within our Fenics businesses, Fenics Markets revenue grew 7.5%, to $115.1 million, in the second quarter of 2024 as compared to the prior year period. Fenics Markets growth was driven by strong electronic FX, Credit and Rates volumes, along with higher Fenics Market Data revenues. BGC's rapidly growing ECS business is expected to provide future electronic growth opportunities for our Fenics Markets business.

Fenics Growth Platforms revenue grew 22.4%, to $22.2 million, in the second quarter of 2024, as compared to the prior year period, primarily driven by PortfolioMatch, Lucera, and FMX. Collectively, our newer Fenics Growth Platform offerings are not yet fully up to scale, but continue to grow at a leading rate compared with other electronic trading platforms. Over time, we expect these new products and services to become profitable, high-margin businesses as their scale and revenues increase, all else equal.

We continue to invest in our Fenics Growth Platforms, and notable highlights for the second quarter of 2024 include:

• PortfolioMatch more than doubled its U.S. credit volumes year-over-year and increased its European volumes by nearly five-fold.
• Lucera revenues grew by 16 percent — its 18th consecutive quarter of double-digit year-over-year revenue growth. Lucera continues to expand its customer base and deepen its existing customer agreements adding to its recurring revenue base.
• FMX UST produced record central limit order book market share of 30 percent for the second quarter, up from 28 percent last quarter, and 23 percent a year ago, according to Coalition Greenwich. FMX UST ADV improved by 37 percent versus the prior year period, achieving new record ADV of $47 billion for the second quarter. This translated to revenue growth of 34 percent.
• FMX FX average daily volumes improved by over 30 percent versus the prior year period on record ADV of $8.1 billion. FMX FX continues to grow faster than the overall market and is expected to significantly grow its market share in the enormous global foreign exchange market.

Total revenues from our high-margin Data, network and post-trade business, which is predominately comprised of recurring revenue, increased by 14.1%, to $30.8 million, and increased by 14.0%, to $61.7 million, for the three and six months ended June 30, 2024, respectively, as compared to the prior year periods.

Data, network and post-trade revenue growth for the second quarter of 2024 was driven by broad based revenue growth across Fenics Market Data, Lucera, and Capitalab.

Fenics brokerage revenues increased by 8.5%, to $106.4 million, and by 6.4%, to $224.8 million, for the three and six months ended June 30, 2024, as compared to the prior year periods.

Fenics’ revenue growth was led by Fenics’ FX, Credit, Rates and Data, network and post-trade businesses in the second quarter of 2024.

Acquisitions

On November 1, 2023 the Company completed the acquisition of ContiCap, an independent financial product intermediary specializing in emerging markets.

On November 1, 2023 the Company completed the acquisition of Open Energy Group, a technology-driven marketplace and brokerage for renewable energy asset sales and project finance.

On February 28, 2023 the Company completed the acquisition of Trident, primarily operating as a commodity brokerage and research company, offering OTC and exchange traded energy and environmental products.

Brands and Trademarks

Amerex, Aurel, Aurel BGC, Capitalab, Caventor, CBID, Conticap, CreditMatch, BGC, BGC Group, BGC Partners, BGC Trader, ELX, Euro Brokers, Fenics, Fenics.com, Fenics Markets Xchange, Fenics Digital, Fenics UST, Fenics FX, Fenics Repo, Fenics Direct, Fenics MID, Fenics MD, Fenics Market Data, Fenics GO, Fenics PortfolioMatch, FMX, FMX Futures, FMX Markets Xchange, FMX UST, FMX FX, FMX Repo, GFI, GFI Ginga, kACE2, Lake Securities, Latium Capital, LumeFX, LumeMarkets, Lucera, Martin Brokers, Maxcor, Matchbox, Mint, MIS Brokers, Perimeter Markets Inc., Poten & Partners, RP Martin, Tower Bridge, Sunrise Brokers, Swaptioniser and VolumeMatch are among the trademarks/service marks and/or registered trademarks/service marks of BGC Group and/or its affiliates in the U.S. and/or other jurisdictions.

Other Matters

In February 2022, the U.S., U.K., EU, and other countries imposed sanctions on Russian counterparties, and as a result BGC has ceased trading with those clients. The Company derived less than 1% of total revenue from its Moscow branch and sanctioned Russian counterparties. During both the three and six months ended June 30, 2024 and 2023, the Company reserved $2.0 million and $4.0 million, respectively, in connection with unsettled trades and receivables with sanctioned Russian entities.

Tax Policy Changes

On August 16, 2022, the IR Act was signed into federal law. The IR Act provides for, among other things, a new corporate alternative minimum tax based on 15% of adjusted financial statement income for applicable corporations. The IR Act also provides for a new U.S. federal 1% excise tax on certain repurchases (including redemptions) of stock by publicly traded U.S. corporations and certain U.S. subsidiaries of publicly traded foreign corporations. The excise tax is imposed on the repurchasing corporation itself and not its stockholders from which the shares are repurchased. In addition, certain exceptions apply to the excise tax. These tax provisions of the IR Act were effective January 1, 2023. The IR Act and related regulatory developments did not have a material impact on our financial statements nor is it expected to have a material impact in future periods.

On July 1, 2021, the OECD released a statement on the Two-Pillar Solution to Address the Tax Challenges Arising From the Digitalization of the Economy, reflecting the agreement of 130 of the member jurisdictions of the Inclusive Framework on some key parameters with respect to Pillars I and II. The objective is to introduce a global minimum tax rate of 15% applicable to multinational groups with global book revenue in excess of EUR 750 million. The tax has the effect of increasing the ETR to 15% in jurisdictions where the ETR calculated under the GloBE Rules is under 15%. In December 2022, the Council of the EU unanimously adopted the EU Minimum Tax Directive, which would require member states to implement these rules. Due to complexities in applying the legislation and calculating GloBE income, the detailed quantitative impact of the enacted or substantively enacted legislation is not yet reasonably estimable. Management performed an analysis of the potential impact of the Pillar Two provisions on its multinational activities. Based on that analysis, management does not believe that the Pillar Two tax regime will result in a material increase to its tax expense. Management will continue to evaluate the potential impact the Pillar Two Framework may have on the future results of operations and financial condition.

Financial Services Industry

The financial services industry has grown historically due to several factors. One factor was the increasing use of derivatives to manage risk or to take advantage of the anticipated direction of a market by allowing users to protect gains and/or guard against losses in the price of underlying assets without having to buy or sell the underlying assets. Derivatives are often used to mitigate the risks associated with interest rates, equity ownership, changes in the value of FX, credit defaults by corporate and sovereign debtors, and changes in the prices of commodity products. Over this same timeframe, demand from financial institutions, large corporations and other end-users of financial products have increased volumes in the wholesale derivatives market, thereby increasing the business opportunity for financial intermediaries.

Another key factor in the historical growth of the financial services industry has been the increase in the number of new financial products. As market participants and their customers strive to mitigate risk, new types of equity and fixed income securities, futures, options and other financial instruments have been developed. Most of these new securities and derivatives were not immediately ready for more liquid and standardized electronic markets, and generally increased the need for trading and required broker-assisted execution.

Due largely to the impacts of the global financial crisis of 2008-2009, our businesses had faced more challenging market conditions from 2009 until the second half of 2016. Accommodative monetary policies were enacted by several major central banks, including the Federal Reserve, Bank of England, Bank of Japan and the European Central Bank, in response to the global financial crises. These policies resulted in historically low levels of volatility and interest rates across many of the financial markets in which we operate. The global credit markets also faced structural issues, such as increased bank capital requirements under Basel III. Consequently, these factors contributed to lower trading volumes in our Rates and Credit asset classes across most geographies in which we operated.

From mid-2016 until the first quarter of 2020, the overall financial services industry benefited from sustained economic growth, lower unemployment rates in most major economies, higher consumer spending, the modification or repeal of certain U.S. regulations, and higher overall corporate profitability. The trend towards digitization and electronification within the industry contributed to higher overall volumes and transaction count in Fully Electronic execution. From the second quarter of 2020 onward, concerns about the future trade relationship between the U.K. and the EU after Brexit, a slowdown in global growth driven by the outbreak of COVID-19, and an increase in trade protectionism were tempered by monetary and fiscal stimulus. During 2021, as the global economy recovered from the COVID-19 pandemic, higher inflation across the U.S. and other G8 countries led many central banks to begin and/or announce tapering and unwinding of asset purchases under quantitative easing programs, as well as implement multiple interest rate hikes.

During the fourteen years between 2008 and 2022, BGC and the entire financial service industry’s trading volumes were constrained by low interest rates and quantitative easing. Manufactured zero and near-zero interest rates caused the breakdown and disappearance of the historic correlation between issuance and trading volume growth. The change in central bank monetary policies away from zero interest rates, following the highest inflation in decades, together with meaningful interest rates set the stage for a resurgence in secondary market trading volumes for rates, credit and foreign exchange. We believe the return of this strong positive correlation in the current macro trading environment, which has meaningful interest rates and issuance that is multiples above 2008 levels, positions BGC to benefit and drive its trading volumes, revenue and profitability higher for the foreseeable future.

Recent Developments

On March 4, 2024, the Company announced that it would be joining the S&P SmallCap 600 Index, with the inclusion taking effect before trading commenced on March 18, 2024. The S&P SmallCap 600 is designed to track the performance of the small-cap sector of the U.S. stock market.

Brexit

On January 1, 2021, the U.K. formally left the EU and U.K.-EU trade became subject to a new agreement that was concluded in December of 2020. The exit from the EU is commonly referred to as Brexit. Financial services fall outside of the scope of this trade agreement. At the time, the relationship was expected to be determined by a series of “equivalence decisions,” each of which would grant mutual market access for a limited subset of financial services where either party finds the other party has a regulatory regime that achieves similar outcomes to its own. In March 2021, the U.K. and EU entered into a Memorandum of Understanding on Financial Services Regulatory Cooperation which creates a structure for dialogue but does not include commitments on equivalence.

In light of ongoing uncertainties, market participants are still adjusting the way in which they conduct business between the U.K. and EU. The impact of Brexit on the U.K.-EU flow of financial services and economies of the U.K. and the EU member states continues to evolve.

We have implemented measures to ensure continuity of service in Europe and continue to have regulated offices in place in many of the major European markets. As part of our ongoing Brexit strategy, ownership of BGC Madrid, Copenhagen and Frankfurt and GFI Paris, Madrid and Dublin branches were transferred to Aurel BGC SAS (a French-based operation and therefore based in the EU) in July 2020. We have been generally increasing our footprint in the EU, including the establishment of a new branch office of Aurel BGC SAS in Milan, and a new office in Monaco under a new local Monaco subsidiary.

Regardless of these and other mitigating measures, our European headquarters and largest operations are in London, and market access risks and uncertainties have had and could continue to have a material adverse effect on our customers, counterparties, business, prospects, financial condition and results of operations. Furthermore, in the future the U.K. and EU’s regulation may further diverge, which could disrupt and increase the costs of our operations, and result in a loss of existing levels of cross-border market access.

Regulation

Regulators in the U.S. have finalized most of the new rules across a range of financial marketplaces, including OTC derivatives, as mandated by the Dodd-Frank Wall Street Reform and Consumer Protection Act. Many of these rules became effective in prior years, while ongoing phase-ins are anticipated over coming years.

In addition to regulations in the U.S., legislators and regulators in Europe have crafted similar rules: MiFID II, which made sweeping changes to market infrastructure, European Market Infrastructure Regulation, which focused specifically on derivatives, and Capital Requirements Directive IV for prudential standards. Over the past few years, European policymakers have launched various reviews of post-financial crisis legislation, leading to legislative updates such as EMIR Regulatory Fitness and Performance and CRD V. In May 2019, the European Securities Market Authority produced a report on proposals to further enhance the harmonization and standardization of derivatives reporting under EMIR, known as EMIR Refit. These proposals require significant changes to the content and format of trade and transaction reporting systems across the industry. The go-live date for these changes was April 29, 2024 for Europe and is September 30, 2024 for the U.K. We remain on track to be in compliance with the reporting enhancements. Furthermore, regulators have introduced a new prudential regime tailored specifically to investment firms such as our firm – the Investment Firm Review. As all these rules take effect, they will continue to alter the environment in which we operate. We note that various internal and external factors have made the EU more rigid in its regulatory approach to non-EU countries, which could impact the ease with which the global financial system is connected.

In 2019, a new European Commission took office which may, over the course of its five-year mandate, introduce new legislative proposals for the Financial Services Sector and change the Brexit landscape for EU and U.K. financial firms alike. We are unable to predict how any of these new laws and proposed rules and regulations in the U.S., the EU or the U.K. will be implemented or in what form, or whether any additional or similar changes to statutes or rules and regulations, including the interpretation or implementation thereof or a relaxation or other amendment of existing rules and regulations, will occur in the future. Any such action could affect us in substantial and unpredictable ways, including important changes in market infrastructure, increased reporting costs and a potential rearrangement in the sources of available revenue in a more transparent market. Certain enhanced regulations could subject us to the risk of fines, sanctions, enhanced oversight, increased financial or capital requirements and additional restrictions or limitations on our ability to conduct or grow our businesses, and could otherwise have an adverse effect on our businesses, financial condition, results of operations and prospects. We believe that uncertainty and potential delays around the final form of such new rules and regulations may negatively impact our customers and trading volumes in certain markets in which we transact, although a relaxation of existing rules and requirements could potentially have a positive impact in certain markets. Increased capital requirements may also diminish transaction velocity.

BGC Derivative Markets and GFI Swaps Exchange, our subsidiaries, operate as SEFs. Mandatory Dodd-Frank Act compliant execution on SEFs by eligible U.S. persons for “made available to trade” products, and a wide range of other rules relating to the execution and clearing of derivative products have been implemented. We also own ELX, which became a dormant contract market on July 1, 2017, and in July 2021 we completed the purchase of the CX Futures Exchange (now FMX Futures Exchange) from Cantor, which represents our futures exchange and related clearinghouse. These rules require authorized execution facilities to maintain robust front-end and back-office IT capabilities and to make large and ongoing technology investments. These execution facilities may be supported by a variety of Voice and auction-based execution methodologies, and our Hybrid and Fully Electronic trading capability have performed strongly in this regulatory environment.

On June 25, 2020, the CFTC approved a final rule prohibiting post-trade name give-up for swaps executed, prearranged or pre-negotiated anonymously on or pursuant to the rules of a SEF and intended to be cleared. The rule provides exemptions for package transactions that include a component transaction that is not a swap that is intended to be cleared. The rule went into effect on November 1, 2020 for swaps subject to the trade execution requirement under the Commodity Exchange Act Section 2(h)(8) and July 5, 2021 for swaps not subject to the trade execution requirement but intended to be cleared.

On November 2, 2023, the SEC adopted Regulation SE under the Exchange Act to create a regime for the registration and regulation of SBSEFs. The SEC rules regarding the over-the-counter derivatives market seek to harmonize as closely as practicable with parallel rules of the CFTC that govern SEFs and swap execution generally. Among other things, Regulation SE under the Exchange Act made changes to implement the Exchange Act’s trade execution requirement for security-based swaps and address the cross-border application of that requirement; implement Section 765 of the Dodd-Frank Act to mitigate conflicts of interest at SBSEFs and national securities exchanges that trade security-based swaps; and promote consistency between proposed Regulation SE and existing rules under the Exchange Act. Any entity that meets the definition of a SBSEF must file an application to register with the SEC within 180 days of the effective date of February 13, 2024.

The SEC also adopted final rules on December 13, 2023 regarding central clearing of certain secondary market repurchase and reverse repurchase transactions and secondary market purchase and sale transactions involving U.S. Treasury securities. The central clearing mandate will impact certain market participants who do not clear today, and some have expressed concerns about the potential impact of additional clearing costs on liquidity. The full impact of this change, whether positive or negative, on our industry, our clients or us is unknown at this time.

In addition, several state-level laws in the U.S. that have recently come into effect, and may come into effect in the future, have created and will create new compliance obligations in relation to personal data.

See “Regulation” included in Part I, Item 1 of our Annual Report on Form 10-K for the year ended December 31, 2023 for additional information related to our regulatory environment.

Industry Consolidation

Over the past decade, there has been significant consolidation among the interdealer-brokers and wholesale brokers with which we compete. We continue to compete with the electronic markets, post-trade and information businesses of the CME through the various offerings on our Fenics platform, which includes FMX. We will also continue to compete with TP ICAP and Tradition across various Voice/Hybrid brokerage marketplaces as well as via Fenics.

Additionally, there has been an increase in acquisitions of OTC trading platforms by exchanges and electronic marketplaces, such as ICE buying BondPoint and TMC Bonds, Deutsche Börse buying 360T, CBOE buying Hotspot, MarketAxess buying LiquidityEdge, Tradeweb buying Nasdaq’s U.S. Fixed Income Electronic Trading Platform, LSEG acquiring Quantile, etc. We view the recent consolidation in the industry favorably, as we expect it to provide additional operating leverage to our businesses in the future.

Growth Drivers

As a wholesale intermediary in the financial services industry, our businesses are driven primarily by secondary trading volumes in the markets in which we broker, the size and productivity of our front-office headcount including brokers, salespeople, managers, technology professionals and other front-office personnel, regulatory issues, and the percentage of our revenues we are able to generate by Fully Electronic means. BGC’s revenues tend to have low correlation in the short- and medium-term with global bank and broker-dealer sales and trading revenues, which reflect bid-ask spreads and mark-to-market movements, as well as industry volumes in both the primary and secondary markets.

Below is a brief analysis of the market and industry volumes for some of our products, including our overall Hybrid and Fully Electronic execution activities.

Overall Market Volumes and Volatility

Volume is driven by a number of factors, including the level of issuance for financial instruments, price volatility of financial instruments, macro-economic conditions, creation and adoption of new products, regulatory environment, and the introduction and adoption of new trading technologies. Historically, increased price volatility has often increased the demand for hedging instruments, including many of the cash and derivative products that we broker.

Rates volumes in particular are influenced by market volumes and, in certain instances, volatility. Historically low and negative interest rates, as well as central bank quantitative easing programs, across the globe significantly reduced the overall trading appetite for rates products. Such programs depressed rates volumes because they entail central banks buying government securities or other securities in the open market in an effort to promote increased lending and liquidity and bring down long-term interest rates. When central banks hold these instruments, they tend not to trade or hedge, thus lowering rates volumes across cash and derivatives markets industry-wide. Following the market dislocation and pandemic, major central banks such as the U.S. Federal Reserve, ECB, Bank of Japan, Bank of England, and Swiss National Bank restarted quantitative easing programs in 2020. Beginning in 2022 inflationary concerns have resulted in rising interest rates and tapering and/or unwinding of central bank asset purchases. The return of interest rates has led to improved macro trading conditions which has benefited BGC. This improved backdrop is expected to support both BGC’s Fenics and Voice/Hybrid businesses for the foreseeable future.

Additional factors have weighed on market volumes in the products we broker. For example, the Basel III accord, implemented in late 2010 by the G-20 central banks, is a global regulatory framework on bank capital adequacy, stress testing and market liquidity risk that was developed with the intention of making banks more stable in the wake of the financial crisis by increasing bank liquidity and reducing bank leverage. The accord, which took effect on January 1, 2023, requires most large banks in G-20 nations to hold approximately three times as much Tier 1 capital as was required under the previous set of rules. These capital rules have made it more expensive for banks to hold non-sovereign debt assets on their balance sheets, and as a result, analysts say that banks have reduced their proprietary trading activity in corporate and asset-backed fixed income securities as well as in various other OTC cash and derivative instruments. We believe that this has further reduced overall market exposure and industry volumes in many of the products we broker, particularly in Credit.

During the three months ended June 30, 2024, industry volumes were higher across Rates, ECS, Foreign Exchange, Credit, and Equities compared to the prior year period. BGC’s brokerage revenues were up by 11.3% year-on-year in the quarter, reflecting broad-based growth across all geographies and strong double-digit revenue growth across BGC’s three largest asset classes, Rates, ECS and Foreign Exchange.

Below is an expanded discussion of the volume and growth drivers of our various brokerage product categories.

Rates Volumes and Volatility

Our Rates business is influenced by a number of factors, including global sovereign issuances, interest rates, central bank policies, secondary trading and the hedging of these sovereign debt instruments. The amount of global sovereign debt outstanding remains at historically high levels; the level of secondary trading and related hedging activity was higher during the second quarter of 2024 compared to the prior year period. According to Bloomberg and the Federal Reserve Bank of New York, the Primary Dealer average daily volume of U.S. Government Securities was up 15% compared to the prior year period. Over the same time period, listed products on CME were up 14%, while OTC interest rate derivative volumes traded on SEF were up 40% compared to the second quarter of 2023, according to Clarus Financial Technology. In comparison, our overall Rates revenues were up 15.1%, as compared to a year earlier, to $166.0 million.

Our Rates revenues, like the revenues for most of our products, are not fully dependent on market volumes and, therefore, do not always fluctuate consistently with industry metrics. This is largely because our Voice, Hybrid, and Fully Electronic Rates desks often have volume discounts built into their price structure, which results in our Rates revenues being less volatile than the overall industry volumes.

Overall, analysts and economists expect the absolute level of sovereign debt outstanding to remain at elevated levels for the foreseeable future as governments finance their future deficits and roll over their sizable existing debt. Additionally, yields on government bonds have steadily increased since 2022, which gave rise to increased volatility and higher demand to hedge interest rate exposure. Expectations around potential future rate cuts by major Central Banks has also given rise to higher levels of interest rate trading activity through the first half of 2024. The tapering and/or unwinding of asset purchases by central banks and, meaningful interest rates, along with elevated levels of government debt issuance, are expected to provide continued tailwinds to our Rates business.

ECS Volumes

ECS volumes were higher during the second quarter of 2024 compared to the prior year period. CME and ICE energy futures and options volumes were up 16% and 31%, respectively, compared to the prior year period. In comparison, BGC’s ECS revenues increased 19.3%, compared to the prior year period, to $117.7 million.

Foreign Exchange Volumes and Volatility

Global FX volumes were higher during the second quarter of 2024. Volumes for CME EBS spot FX was up 5%, while Euronext FX was up 27%, during the quarter compared to the prior year period. In comparison, our overall FX revenues increased by 14.7%, compared to the prior year period, to $88.9 million.

Credit Volumes

Our Credit business is impacted by the level of global corporate bond issuance, and interest rates. Credit volumes were higher during the second quarter of 2024 compared to the prior year period. FINRA TRACE average daily volume for U.S. Investment Grade was up 24% and U.S. High Yield was up 19% according to Bloomberg and the Federal Reserve Bank of New York, respectively. In comparison, our overall Credit revenues increased by 5.4%, compared to the prior year period, to $69.4 million.

Equities Volumes

Global equity volumes were generally higher during the second quarter of 2024 compared to the prior year period. According to the Securities Industry and Financial Markets Association, or SIFMA, the average daily volume of U.S. cash equities traded was up 9% as compared to a year earlier. Over the same timeframe, Eurex average daily volumes of equity and equity index derivatives were up 9%, Euronext equity derivative index volumes were up 11%, and according to the OCC, the average daily volume of U.S. options was up 7%. BGC’s equity business primarily consists of equity derivatives, particularly European equity derivatives. Our overall revenues from Equities decreased by 10.4%, compared to the prior year period, to $51.4 million.

REGULATORY ENVIRONMENT

See “Regulation” in Part I, Item 1 of our Annual Report on Form 10-K for the year ended December 31, 2023 for additional information related to our regulatory environment.

LIQUIDITY

See “Liquidity and Capital Resources” herein for information related to our Liquidity and capital resources.

HIRING

Key drivers of our revenue are front-office producer headcount and average revenue per producer. We believe that our strong technology platform and unique compensation structure have enabled us to use both acquisitions and recruiting to uniquely position us to be able to outperform our peer group.

We have invested significantly through acquisitions and the hiring of new brokers, salespeople, managers, technology professionals and other front-office personnel. The business climate for these acquisitions has been competitive, and it is expected that these conditions will persist for the foreseeable future. We have been able to attract businesses and brokers, salespeople, managers, technology professionals and other front-office personnel to our platform as we believe they recognize that we have the scale, technology, experience and expertise to succeed.

As of June 30, 2024, our front-office headcount was 2,122 brokers, salespeople, managers, technology professionals and other front-office personnel, up 4.7% from 2,024 a year ago. Compared to the prior year, average revenue per front-office employee for the three months ended June 30, 2024, increased by 6.0%, to $0.2 million.

The laws and regulations passed or proposed on both sides of the Atlantic concerning OTC trading seem likely to favor increased use of technology by all market participants, and are likely to accelerate the adoption of both Hybrid and Fully Electronic execution. We believe these developments will favor the larger inter-dealer brokers over smaller, non-public local competitors, as the smaller players generally do not have the financial resources to invest the necessary amounts in technology. We believe this will lead to further consolidation across the wholesale financial brokerage industry, and thus allow us to grow profitably.

FINANCIAL HIGHLIGHTS

For the three months ended June 30, 2024 compared to the three months ended June 30, 2023

Income from operations before income taxes was $55.2 million compared to loss from operations before income taxes of $31.3 million in the prior year period.

Total revenues increased $57.7 million compared to the prior year period, or 11.7%, to $550.8 million, largely due to growth of 11.3% in our brokerage revenues, driven by strong growth across most of our asset classes:

• Rates increased $21.8 million, or 15.1%;
• ECS increased $19.1 million, or 19.3%;
• FX increased $11.4 million, or 14.7%;
• Credit increased $3.6 million, or 5.4%; and
• Equities decreased $6.0 million, or 10.4%.

In addition, there was an increase of $3.8 million in Data, network and post-trade revenues, primarily driven by broad-based revenue growth across Fenics Market Data, our Lucera network business and our Capitalab post-trade business, as a result of expanding both our client base and our offerings. Furthermore, there was an increase of $3.8 million in Interest and dividend income, primarily driven by income earned on money market funds. The increase in BGC revenues also reflects broad-based growth across all geographies - EMEA, Americas, and APAC grew by 14.4%, 9.5%, and 7.9%, respectively.

Total expenses decreased $25.6 million, or 4.9%, to $500.2 million. There was a $31.8 million decrease in total compensation expenses primarily driven by a decrease in equity-based compensation, partially offset by higher commission revenues on variable compensation. The $6.2 million increase in non-compensation expenses was primarily driven by increases in Interest expense related to the BGC Partners 8.000% Senior Notes issued on May 24, 2023, the BGC Group 6.600% Senior Notes issued June 10, 2024, and borrowings on the Revolving Credit Agreement. These higher interest expenses were partially offset by lower interest due to the repayment in full of the BGC Partners 5.375% Senior Notes on July 24, 2023.

For the six months ended June 30, 2024 compared to the six months ended June 30, 2023:

Income from operations before income taxes of $126.3 million compared to $2.0 million for the same period in the prior year.

Total revenues increased $103.4 million, or 10.1%, to $1,129.4 million, largely due to growth of 9.2% in our brokerage revenues:

• ECS increased $47.9 million, or 25.4%,
• Rates increased $32.2 million, or 10.4%;
• FX increased $15.3 million, or 9.7%;
• Credit increased $1.6 million, or 1.0%; and
• Equities decreased $11.2 million, or 8.9%.

In addition, there was an increase of $7.6 million in Data, network and post-trade revenues, primarily driven by strong revenue growth across Fenics Market Data, our Lucera network business and our Capitalab post-trade business, as a result of expanding both our client base and our offerings. Furthermore, there was an increase of $8.2 million in Interest and dividend income, primarily driven by income earned on money market funds and employee loans.

Total expenses increased $22.5 million, or 2.2%, to $1,048.2 million. There was a $6.5 million increase in total compensation expenses, which was primarily driven by higher commission revenues on variable compensation, and an increase in headcount. These higher compensation expenses were partially offset by a $45.7 million decrease in equity-based compensation, which was primarily a result of a $60.9 million charge for the redemption of certain non-exchangeable limited partnership units in connection with the issuance of shares of BGC Group Class A common stock and the accompanying tax payments related to the Corporate Conversion in the six months ended June 30, 2023. The $16.0 million increase in non-compensation expenses was primarily driven by increases in Interest expense related to the BGC Partners 8.000% Senior Notes issued on May 24, 2023, the BGC Group 6.600% Senior Notes issued June 10, 2024, and borrowings on both the Revolving Credit Agreement and BGC Credit Agreement. These higher interest expenses were partially offset by lower interest due to the repayment in full of the BGC Partners 5.375% Senior Notes on July 24, 2023.

Total other income (losses), net increased $43.4 million, to $45.1 million, which was largely driven by a $36.6 million unrealized gain recorded in the six months ended June 30, 2024 related to fair value adjustments on investments carried under the measurement alternative.

RESULTS OF OPERATIONS

The following table sets forth our unaudited Condensed Consolidated Statements of Operations data expressed as a percentage of total revenues for the periods indicated (dollar amounts in thousands):

1The components of Equity-based compensation and allocations of net income to limited partnership units and FPUs are as follows (dollar amounts in thousands):

Three Months Ended June 30, 2024 Compared to Three Months Ended June 30, 2023

Revenues

Brokerage Revenues

Total brokerage revenues increased by $49.9 million, or 11.3%, to $493.5 million for the three months ended June 30, 2024 as compared to the three months ended June 30, 2023. Commission revenues increased by $46.4 million, or 13.3%, to $395.1 million for the three months ended June 30, 2024 as compared to the three months ended June 30, 2023. Principal transactions revenues increased by $3.6 million, or 3.7%, to $98.4 million for the three months ended June 30, 2024 as compared to the three months ended June 30, 2023.

Our brokerage revenues from Rates increased by $21.8 million, or 15.1%, to $166.0 million for the three months ended June 30, 2024 as compared to the three months ended June 30, 2023, reflecting higher volumes across interest rate derivatives, including our Euro, U.S. Dollar and new Yen rates businesses.

Our brokerage revenues from ECS increased by $19.1 million, or 19.3%, to $117.7 million for the three months ended June 30, 2024 as compared to the three months ended June 30, 2023, which was primarily driven by strong organic growth across the business.

Our FX revenues increased by $11.4 million, or 14.7%, to $88.9 million for the three months ended June 30, 2024 as compared to the three months ended June 30, 2023, which was primarily driven by emerging markets products and G10 options volumes.

Our Credit revenues increased by $3.6 million, or 5.4%, to $69.4 million for the three months ended June 30, 2024 as compared to the three months ended June 30, 2023, which was primarily driven by higher trading volumes across European, emerging market, and U.S. credit products, partially offset by lower Asian credit activity.

Our brokerage revenues from Equities decreased by $6.0 million, or 10.4%, to $51.4 million for the three months ended June 30, 2024 as compared to the three months ended June 30, 2023, which was primarily due to lower equity derivative trading volumes, partially offset by higher cash equity activity.

Fees from Related Parties

Fees from related parties increased by $0.6 million, or 14.3%, to $4.6 million for the three months ended June 30, 2024 as compared to the three months ended June 30, 2023. This was primarily driven by an increase in revenues in connection with services provided to Cantor.

Data, Network and Post-Trade

Data, network and post-trade revenues increased by $3.8 million, or 14.1%, to $30.8 million for the three months ended June 30, 2024 as compared to the three months ended June 30, 2023. This increase was primarily driven by strong revenue growth across Fenics Market Data, Lucera, our network business and Capitalab, our post-trade business, as a result of expanding both our client base and our offerings.

Interest and Dividend Income

Interest and dividend income increased by $3.8 million, or 28.2%, to $17.1 million for the three months ended June 30, 2024 as compared to the three months ended June 30, 2023. This was driven by an increase in interest income on money market funds, which were primarily driven by changing interest rates and larger balances.

Other Revenues

Other revenues decreased by $0.4 million, or 8.0%, to $4.6 million for the three months ended June 30, 2024 as compared to the three months ended June 30, 2023.

Expenses

Compensation and Employee Benefits

Compensation and employee benefits expense increased by $28.6 million, or 11.8%, to $272.0 million for the three months ended June 30, 2024 as compared to the three months ended June 30, 2023, which was primarily driven by higher revenues, as well as an increase in newly hired brokers and new business lines.

Equity-Based Compensation and Allocations of Net Income to Limited Partnership Units and FPUs

Equity-based compensation and allocations of net income to limited partnership units and FPUs decreased by $60.4 million, or 47.7%, to $66.2 million for the three months ended June 30, 2024 as compared to the three months ended June 30, 2023. This was primarily driven by the issuance of common stock and grants of exchangeability, which included a $60.9 million charge for the redemption of certain non-exchangeable limited partnership units in connection with the issuance of shares of BGC Class A common stock and the accompanying tax payments related to the Corporate Conversion, in the three months ended June 30, 2023. The decrease was also due to the cessation of LPU amortization expenses, as a result of the Corporate Conversion. The decreases were partially offset by an increase in RSU, RSU Tax Account, and restricted stock amortization expense.

Occupancy and Equipment

Occupancy and equipment expense increased by $0.5 million, or 1.2%, to $41.0 million for the three months ended June 30, 2024 as compared to the three months ended June 30, 2023.

Fees to Related Parties

Fees to related parties remained flat at $8.0 million for both the three months ended June 30, 2024 and June 30, 2023. Fees to related parties are primarily allocations paid to Cantor for administrative and support services.

Professional and Consulting Fees

Professional and consulting fees decreased by $2.0 million, or 13.6%, to $12.8 million for the three months ended June 30, 2024 as compared to the three months ended June 30, 2023, which was primarily driven by a decrease in consulting and other professional services and fees.

Communications

Communications expense increased by $2.4 million, or 8.5%, to $30.2 million for the three months ended June 30, 2024 as compared to three months ended June 30, 2023, which was primarily driven by an increase in various terminal and line service costs across market data and communications.

Selling and Promotion

Selling and promotion expense increased by $2.4 million, or 15.6%, to $17.7 million for the three months ended June 30, 2024 as compared to the three months ended June 30, 2023, which was primarily driven by an increase in business related travel and client entertainment.

Commissions and Floor Brokerage

Commissions and floor brokerage expense increased by $1.3 million, or 7.8%, to $17.4 million for the three months ended June 30, 2024 as compared to the three months ended June 30, 2023, which was primarily driven by a higher number of trades in the three months ended June 30, 2024 and an increase in commission expense.

Interest Expense

Interest expense increased by $1.6 million, or 8.2%, to $21.6 million for the three months ended June 30, 2024 as compared to the three months ended June 30, 2023, which was primarily driven by interest expense related to the Company’s 8.000% Senior Notes issued on May 24, 2023, the BGC Group 6.600% Senior Notes issued June 10, 2024, and higher borrowings on the Revolving Credit Agreement. These increases were partially offset by a decrease in interest expense related to the BGC Partners 5.375% Senior Notes due to their maturity on July 24, 2023.

Other Expenses

Other expenses remained flat at $13.3 million for both the three months ended June 30, 2024 and 2023.

Other Income (Losses), Net

Gains (Losses) on Equity Method Investments

Gains (losses) on equity method investments increased by $0.3 million, or 13.8%, which was due to a gain of $2.7 million for the three months ended June 30, 2024 as compared to a gain of $2.4 million for the three months ended June 30, 2023.

Other Income (Loss)

Other income (loss) increased by $2.8 million to a gain of $1.8 million for the three months ended June 30, 2024 as compared to the three months ended June 30, 2023, which was primarily driven by an increase in other recoveries for the three months ended June 30, 2024, and losses recognized on litigation resolutions in the three months ended June 30, 2023.

Provision (Benefit) for Income Taxes

Provision (benefit) for income taxes increased by $27.1 million, or 298.4%, to $18.0 million of tax expense for the three months ended June 30, 2024 as compared to the three months ended June 30, 2023. The increase was primarily driven by an increase in pre-tax earnings and change in the geographical and business mix of earnings, which can impact our consolidated effective tax rate from period-to-period.

Net Income (Loss) Attributable to Noncontrolling Interest in Subsidiaries

Net income (loss) attributable to noncontrolling interest in subsidiaries increased by $1.9 million, or 73.9%, to a loss of $0.7 million for the three months ended June 30, 2024 as compared to a loss of $2.5 million for the three months ended June 30, 2023, primarily due to no longer reflecting net income (loss) attributable to noncontrolling interest in subsidiaries related to BGC Holdings as a result of the Corporate Conversion.

Six Months Ended June 30, 2024 Compared to Six Months Ended June 30, 2023

Revenues

Brokerage Revenues

Total brokerage revenues increased by $85.7 million, or 9.2%, to $1,021.5 million for the six months ended June 30, 2024 as compared to the six months ended June 30, 2023. Commission revenues increased by $84.2 million, or 11.6%, to $810.3 million for the six months ended June 30, 2024 as compared to the six months ended June 30, 2023. Principal transactions revenues increased by $1.5 million, or 0.7%, to $211.3 million for the six months ended June 30, 2024 as compared to the six months ended June 30, 2023.

Our Rates revenues increased by $32.2 million, or 10.4%, to $341.1 million for the six months ended June 30, 2024, as compared to the six months ended June 30, 2023, reflecting higher volumes across interest rate derivatives.

Our ECS revenues increased by $47.9 million, or 25.4%, to $236.2 million for the six months ended June 30, 2024, as compared to the six months ended June 30, 2023, which was primarily driven by strong volume growth across our energy complex and our environmental business.

Our FX revenues increased by $15.3 million, or 9.7%, to $173.0 million for the six months ended June 30, 2024, as compared to the six months ended June 30, 2023, which was primarily driven by emerging market products and G10 options volumes.

Our Credit revenues increased by $1.6 million, or 1.0%, to $157.0 million for the six months ended June 30, 2024, as compared to the six months ended June 30, 2023. This increase was primarily driven by higher trading volumes across European and emerging markets credit products, offset by lower Asian credit activity.

Our brokerage revenues from Equities decreased by $11.2 million, or 8.9%, to $114.3 million for the six months ended June 30, 2024, as compared to the six months ended June 30, 2023, which was primarily due to lower equity derivative trading volumes, partially offset by higher cash equity activity.

Fees from Related Parties

Fees from related parties increased by $1.0 million, or 13.0%, to $9.1 million for the six months ended June 30, 2024 as compared to the prior year, which was primarily driven by an increase in revenues in connection with services provided to Cantor.

Data, Network and Post-Trade

Data, network and post-trade revenues increased by $7.6 million, or 14.0%, to $61.7 million for the six months ended June 30, 2024 as compared to the same period in prior year. This increase was primarily driven by strong revenue growth across Lucera, Fenics Market Data, and our Capitalab post-trade business, as a result of expanding both our client base and our offerings.

Interest and Dividend Income

Interest and dividend income increased by $8.2 million, or 44.0%, to $26.9 million for the six months ended June 30, 2024 as compared to the six months ended June 30, 2023. This was primarily driven by an increase interest income on money market funds, employee loans, and bank deposits, which were primarily driven by changing interest rates and larger balances.

Other Revenues

Other revenues increased by $0.8 million, or 9.1% to $10.1 million for the six months ended June 30, 2024 as compared to the six months ended June 30, 2023, primarily driven by an increase in consulting income and dividend income on investments.

Expenses

Compensation and Employee Benefits

Compensation and employee benefits expense increased by $52.2 million, or 10.2%, to $562.8 million for the six months ended June 30, 2024 as compared to the six months ended June 30, 2023. The primary driver of the increase was higher commission revenues on variable compensation, and an increase in headcount.

Equity-Based Compensation and Allocations of Net Income to Limited Partnership Units and FPUs

Equity-based compensation and allocations of net income to limited partnership units and FPUs decreased by $45.7 million, or 22.0%, to $162.3 million for the six months ended June 30, 2024 as compared to the six months ended June 30, 2023. This was primarily driven by the issuance of common stock and grants of exchangeability, which included a $60.9 million charge for the redemption of certain non-exchangeable limited partnership units in connection with the issuance of shares of BGC Class A common stock and the accompanying tax payments related to the Corporate Conversion, in the six months ended June 30, 2023. The decrease was also due to the cessation of LPU amortization expenses, as a result of the Corporate Conversion. The decreases were partially offset by increases in RSU, RSU Tax Account, and restricted stock amortization expenses.

Occupancy and Equipment

Occupancy and equipment expense remained flat at $81.8 million for both the six months ended June 30, 2024 and 2023.

Fees to Related Parties

Fees to related parties decreased by $1.2 million, or 7.3%, to $15.2 million for the six months ended June 30, 2024 as compared to the six months ended June 30, 2023. Fees to related parties are allocations paid to Cantor for administrative and support services.

Professional and Consulting Fees

Professional and consulting fees decreased by $3.5 million, or 11.3%, to $27.1 million for the six months ended June 30, 2024 as compared to the six months ended June 30, 2023 primarily driven by a decrease in consulting and other professional services and fees.

Communications

Communications expense increased by $4.4 million, or 7.9%, to $60.2 million for the six months ended June 30, 2024 as compared to the six months ended June 30, 2023, primarily driven by increases in various terminal and line service costs across market data and communications.

Selling and Promotion

Selling and promotion expense increased by $4.5 million, or 15.2%, to $34.5 million for the six months ended June 30, 2024 as compared to the six months ended June 30, 2023, primarily driven by an increase in business related travel and client entertainment.

Commissions and Floor Brokerage

Commissions and floor brokerage expense increased by $3.4 million, or 10.8%, to $34.8 million for the six months ended June 30, 2024 as compared to the six months ended June 30, 2023, which was primarily driven by a higher number of trades in the six months ended June 30, 2024.

Interest Expense

Interest expense increased by $6.0 million, or 16.9%, to $41.7 million for the six months ended June 30, 2024 as compared to the six months ended June 30, 2023, primarily driven by interest expense related to the BGC Partners 8.000% Senior Notes issued on May 24, 2023, the BGC Group 6.600% Senior Notes issued June 10, 2024, and higher borrowings on both the Revolving Credit Agreement and BGC Credit Agreement, partially offset by a decrease in interest expense related to the BGC Partners 5.375% Senior Notes due to repayment in full on July 24, 2023.

Other Expenses

Other expenses increased by $2.2 million, or 8.4%, to $27.9 million for the six months ended June 30, 2024 as compared to the six months ended June 30, 2023, which was primarily due to an increase in revaluation expense and additional amortization expense related to new acquisitions, partially offset by a decrease in other provisions.

Other Income (Losses), net

Gains (Losses) on Equity Method Investments

Gains (losses) on equity method investments increased by $0.1 million, or 1.3%, to a gain of $4.5 million, for the six months ended June 30, 2024 as compared to a gain of $4.5 million for the six months ended June 30, 2023.

Other Income (Loss)

Other income (loss) increased by $43.3 million to a gain of $40.6 million for the six months ended June 30, 2024 as compared to the six months ended June 30, 2023, primarily driven by a $36.6 million unrealized gain recorded related to fair value adjustments on investments carried under the measurement alternative, and an increase in other recoveries.

Provision (Benefit) for Income Taxes

Provision (benefit) for income taxes increased by $37.1 million, to $40.0 million for the six months ended June 30, 2024 as compared to the six months ended June 30, 2023. This increase was primarily driven by an increase in pretax earnings and a change in the geographical and business mix of earnings, which can impact our consolidated effective tax rate from period-to-period.

Net Income (Loss) Attributable to Noncontrolling Interest in Subsidiaries

Net income (loss) attributable to noncontrolling interest in subsidiaries decreased by $0.5 million, or 161.8%, to a loss of $0.8 million for the six months ended June 30, 2024 as compared to a loss of $0.3 million for the six months ended June 30, 2023, primarily due to no longer reflecting net income (loss) attributable to noncontrolling interest in subsidiaries related to BGC Holdings as a result of the Corporate Conversion.

QUARTERLY RESULTS OF OPERATIONS

The following table sets forth our unaudited quarterly results of operations for the indicated periods (in thousands). Results of any period are not necessarily indicative of results for a full year and may, in certain periods, be affected by seasonal fluctuations in our business. Certain reclassifications have been made to prior period amounts to conform to the current period’s presentation.

96

The table below details our brokerage revenues by product category for the indicated periods (dollar amounts in thousands):

1Includes Fenics Integrated.

LIQUIDITY AND CAPITAL RESOURCES

Balance Sheet

Our balance sheet and business model are not capital intensive. Our assets consist largely of Cash and cash equivalents, collateralized and uncollateralized short-dated receivables and less liquid assets needed to support our business. Longer-term capital (equity and notes payable) is held to support the less liquid assets and potential capital investment opportunities. Total assets as of June 30, 2024 were $4.3 billion, an increase of 34.1% as compared to December 31, 2023. The increase in total assets was driven primarily by an increase in Receivables from broker-dealers, clearing organizations, customers and related broker-dealers, Financial instruments owned, at fair value and Accrued commissions and other receivables, net. We maintain a significant portion of our assets in Cash and cash equivalents and Financial instruments owned, at fair value, with Cash and cash equivalents as of June 30, 2024 of $571.7 million, and our Liquidity as of June 30, 2024 of $759.1 million. See “Liquidity Analysis” below for a further discussion of our Liquidity and a reconciliation to the most comparable GAAP financial measure. Our Financial instruments owned, at fair value, were $194.0 million as of June 30, 2024, compared to $45.8 million as of December 31, 2023.

As part of our cash management process, we may enter into Reverse Repurchase Agreements and other short-term investments, some of which may be with Cantor. As of both June 30, 2024 and December 31, 2023, there were no Reverse Repurchase Agreements outstanding. Our Repurchase Agreements as of June 30, 2024 were $6.6 million, which matured on July 1, 2024. We had no Repurchase Agreements as of December 31, 2023. As of both June 30, 2024 and December 31, 2023 there were no Securities loaned outstanding.

At December 31, 2019, the Company completed the calculation of the one-time transition tax on the deemed repatriation of foreign subsidiaries’ earnings pursuant to the Tax Act and previously recorded a net cumulative tax expense of $28.6 million, net of foreign tax credits. During the second quarter of 2024, the Company settled its 2017 audit with the Internal Revenue Service which included the transition tax. The revised net cumulative transition tax expense is $25.3 million, net of foreign tax credits, resulting in a net adjustment of the payable balance by $3.3 million. An installment election can be made to pay the taxes over eight years with 40% paid in equal installments over the first five years and the remaining 60% to be paid in installments of 15%, 20% and 25% in years six, seven and eight, respectively. The cumulative remaining balance as of June 30, 2024 was $11.4 million.

On June 10, 2024, Cantor borrowed $180.0 million from the Company under the BGC Credit Agreement, and such borrowings were outstanding as of June 30, 2024. The Company recorded interest income related to the BGC Credit Agreement of $0.8 million for the three and six months ended June 30, 2024. The Company did not record any interest income related to the BGC Credit Agreement for the three and six months ended June 30, 2023. On July 31, 2024, Cantor made a partial repayment of $18.0 million to the Company of the $180.0 million borrowed from the Company under the BGC Credit Agreement. As of July 31, 2024, the interest rate on this facility was 7.18%. See Note 13—“Related Party Transactions” and Note 17—“Notes Payable and Other Borrowings” to our unaudited Condensed Consolidated Financial Statements in Part I, Item 1 of this Quarterly Report on Form 10-Q for information regarding our BGC Credit Agreement with Cantor.

Additionally, in August 2013, the Audit Committee authorized us to invest up to $350.0 million in an asset-backed commercial paper program for which certain Cantor entities serve as placement agent and referral agent. The program issues short-term notes to money market investors and is expected to be used from time to time as a liquidity management vehicle. The notes are backed by assets of highly rated banks. We are entitled to invest in the program so long as the program meets investment policy guidelines, including policies relating to ratings. Cantor will earn a spread between the rate it receives from the short-term note issuer and the rate it pays to us on any investments in this program. This spread will be no greater than the spread earned by Cantor for placement of any other commercial paper note in the program. As of both June 30, 2024 and December 31, 2023, we did not have any investments in the program.

Funding

Our funding base consists of longer-term capital (equity and notes payable), collateralized financings and shorter-term liabilities incurred through the normal course of business. We have limited need for short-term unsecured funding in our regulated entities for their brokerage business. Contingent liquidity needs are largely limited to potential cash collateral that may be needed to meet clearing bank, clearinghouse, and exchange margins and/or to fund fails. Current cash and cash equivalent balances exceed our potential normal course contingent liquidity needs. We believe that cash and cash equivalents in and available to our largest regulated entities, inclusive of financing provided by clearing banks and cash segregated under regulatory requirements, is adequate for potential cash demands of normal operations, such as margin or financing of fails. We expect our operating activities going forward to generate adequate cash flows to fund normal operations, share repurchases, and any dividends paid pursuant to our dividend policy. However, we continually evaluate opportunities for growth and to further enhance our strategic position, including, among other things, acquisitions, strategic alliances and joint ventures potentially involving all types and combinations of equity, debt and acquisition alternatives. As a result, we may need to raise additional funds to:

• increase the regulatory net capital necessary to support operations;
• support continued growth in our businesses;
• effect acquisitions, strategic alliances, joint ventures and other transactions;
• develop new or enhanced products, services and markets; and
• respond to competitive pressures.

Acquisitions and financial reporting obligations related thereto may impact our ability to access longer term capital markets funding on a timely basis and may necessitate greater short-term borrowings in the interim. This may impact our credit rating or our costs of borrowing. We may need to access short-term capital sources to meet business needs from time to time, including, but not limited to, conducting operations; hiring or retaining brokers, salespeople, managers, technology professionals and other front-office personnel; financing acquisitions; and providing liquidity, including in situations where we may not be able to access the capital markets in a timely manner when desired by us. Accordingly, we cannot guarantee that we will be able to obtain additional financing when needed on terms that are acceptable to us, if at all.

As discussed below, our Liquidity remained strong at $759.1 million as of June 30, 2024, which can be used for share repurchases, dividends, new hires, tax payments, ordinary movements in working capital, and our continued investment in Fenics Growth Platforms. During the six months ended June 30, 2024, we repurchased 19.3 million shares of BGC Class A common stock for aggregate consideration of $147.9 million, representing a weighted-average price per share of $7.68.

As of August 7, 2024, we have repurchased an additional 3.7 million shares of BGC Class A common stock during the third quarter for aggregate consideration of $32.4 million, representing a weighted-average price per share of $8.72.

On July 29, 2024, our Board declared a $0.02 dividend for the second quarter of 2024. Our current capital allocation priorities are to return capital to stockholders and to continue investing in the growth of our business.

Between April 23, 2024 and April 24, 2024, the FMX Equity Partners contributed $171.7 million into FMX.

Notes Payable and Other Borrowings

Unsecured Senior Revolving Credit Agreement

On March 12, 2024, the Company repaid in full the $240.0 million of borrowings then-outstanding under the Revolving Credit Agreement, which had been borrowed in 2023. On April 1, 2024, we borrowed $275.0 million under the Revolving Credit Agreement, and used the proceeds from such borrowing, along with cash on hand, to repay the principal and interest related to all of the $275.0 million of borrowings outstanding under the BGC Credit Agreement. On June 10, 2024, we repaid in full the $275.0 million of borrowings outstanding under the Revolving Credit Agreement. Therefore, there were no borrowings outstanding under the Revolving Credit Agreement as of June 30, 2024. As of December 31, 2023, there were $240.0 million of borrowings outstanding under the Revolving Credit Agreement. For the three and six months ended June 30, 2024, the Company recorded interest expense related to the Revolving Credit Agreement of $4.2 million and $7.9 million, respectively. For the three and six months ended June 30, 2023, BGC Partners recorded interest expense related to the Revolving Credit Agreement of $1.6 million and $2.8 million, respectively.

On April 26, 2024, the Company amended and restated the Revolving Credit Agreement, to, among other things, extend the maturity date to April 26, 2027, and provide the Company with the right to increase the facility up to $475.0 million, subject to certain conditions being met. The borrowing rates and financial covenants under the amended and restated Revolving Credit Agreement are substantially unchanged.

See Note 17—“Notes Payable and Other Borrowings” to our unaudited Condensed Consolidated Financial Statements in Part I, Item 1 of this Quarterly Report on Form 10-Q for information regarding our Revolving Credit Agreement.

BGC Credit Agreement with Cantor

On March 8, 2024, the Company entered into a second amendment to the BGC Credit Agreement which amends the BGC Credit Agreement to provide that the parties and their respective subsidiaries may borrow up to an aggregate principal amount of $400.0 million from each other from time to time at an interest rate equal to 25 basis points less than the interest rate on the respective borrower’s short-term borrowings rate then in effect. On June 7, 2024, the Company entered into a third amendment to the BGC Credit Agreement. The third amendment provides that the parties and their respective subsidiaries may borrow up to the total available aggregate principal amount of $400.0 million pursuant to a new category of “FICC-GSD Margin Loans.” All other terms of the BGC Credit Agreement, including terms applicable to loans made thereunder that are not FICC-GSD Margin Loans, remain the same.

On March 12, 2024, the Company borrowed $275.0 million from Cantor under the BGC Credit Agreement and used the proceeds from such borrowing to repay the principal and interest related to all of the $240.0 million of borrowings outstanding under the Revolving Credit Agreement. On April 1, 2024, we repaid in full the principal and interest related to the $275.0 million of borrowings outstanding under the BGC Credit Agreement. As of June 30, 2024, there were no borrowings by the Company outstanding under the BGC Credit Agreement. As of December 31, 2023, there were no borrowings by BGC Partners or Cantor outstanding under this agreement. The Company did not record any interest expense related to the BGC Credit Agreement for the three months ended June 30, 2024. The Company recorded interest expense related to the BGC Credit Agreement of $1.1 million for the six months ended June 30, 2024. The Company did not record any interest expense related to the BGC Credit Agreement for the three and six months ended June 30, 2023. See “Liquidity and Capital Resources—Balance Sheet” herein, Note 13—“Related Party Transactions,” and Note 17—“Notes Payable and Other Borrowings” to our unaudited Condensed Consolidated Financial Statements in Part I, Item 1 of this Quarterly Report on Form 10-Q for information regarding our BGC Credit Agreement with Cantor.

5.375% Senior Notes due July 24, 2023

On July 24, 2018, BGC Partners issued an aggregate of $450.0 million principal amount of BGC Partners 5.375% Senior Notes. The BGC Partners 5.375% Senior Notes were general senior unsecured obligations of BGC Partners. On July 24, 2023, BGC Partners repaid the $450.0 million principal amount plus accrued interest on the BGC Partners 5.375% Senior Notes using the proceeds from the issuance of the BGC Partners 8.000% Senior Notes, cash on hand and borrowings under the Revolving Credit Agreement. We recorded interest expense related to the 5.375% Senior Notes of $6.4 million and $12.8 million for the three and six months ended June 30, 2023, respectively.

See Note 13—“Related Party Transactions” and Note 17—“Notes Payable and Other Borrowings” to our unaudited Condensed Consolidated Financial Statements in Part I, Item 1 of this Quarterly Report on Form 10-Q for information regarding our 5.375% Senior Notes.

Exchange Offer and Market-Making Registration Statement

On October 6, 2023, we completed the Exchange Offer, in which we exchanged BGC Partners Notes for new notes issued by BGC Group with the same respective interest rates, maturity dates and substantially identical terms as the tendered notes, and cash. In connection with the Exchange Offer, and on behalf of BGC Partners, we also solicited consents from (i) holders of the BGC Partners Notes to certain proposed amendments to the indenture and supplemental indentures pursuant to which such BGC Partners Notes were issued to, among other things, eliminate certain affirmative and restrictive covenants and events of default, including the “Change of Control” provisions, which had applied to each series of the BGC Partners Notes, and (ii) holders of the BGC Partners 8.000% Senior Notes to amend the registration rights agreement relating thereto to terminate such agreement.

On October 19, 2023, we filed a resale registration statement on Form S-3 pursuant to which CF&Co may make offers and sales of the BGC Group Notes in connection with ongoing market-making transactions which may occur from time to time. Such market-making transactions in these securities may occur in the open market or may be privately negotiated at prevailing market prices at a time of resale or at related or negotiated prices. Neither CF&Co, nor any other of our affiliates, has any obligation to make a market in our securities, and CF&Co or any such other affiliate may discontinue market-making activities at any time without notice.

See Note 17—“Notes Payable and Other Borrowings” to our unaudited Condensed Consolidated Financial Statements in Part I, Item 1 of this Quarterly Report on Form 10-Q for information regarding our Exchange Offer and the market-making registration statement.

3.750% Senior Notes due October 1, 2024

On October 11, 2019, BGC Partners filed a Registration Statement on Form S-4, which was declared effective by the SEC on October 24, 2019. On October 28, 2019, BGC Partners launched an exchange offer in which holders of the BGC Partners 3.750% Senior Notes, issued in a private placement on September 27, 2019, could exchange such notes for new registered notes with substantially identical terms. The exchange offer closed on December 9, 2019, at which point the initial BGC Partners 3.750% Senior Notes were exchanged for new registered notes with substantially identical terms.

The outstanding aggregate principal amount of BGC Group 3.750% Senior Notes, which are general senior unsecured obligations of BGC Group, was $255.5 million as of June 30, 2024. BGC Group recorded interest expense related to the BGC Group 3.750% Senior Notes of $2.6 million for the three months ended June 30, 2024. BGC Group recorded interest expense related to the BGC Group 3.750% Senior Notes of $5.3 million for the six months ended June 30, 2024. BGC Group did not record interest expense related to the BGC Group 3.750% Senior Notes for the three and six months ended June 30, 2023.

The outstanding aggregate principal amount of BGC Partners 3.750% Senior Notes, which are general senior unsecured obligations of BGC Partners, was $44.5 million as of June 30, 2024. BGC Partners recorded interest expense related to the BGC Partners 3.750% Senior Notes of $0.4 million and $3.0 million, respectively, for the three months ended June 30, 2024 and 2023. BGC Partners recorded interest expense related to the BGC Partners 3.750% Senior Notes of $0.9 million and $6.0 million, respectively, for the six months ended June 30, 2024 and 2023.

The BGC Group 3.750% Senior Notes and the BGC Partners 3.750% Senior Notes will mature on October 1, 2024. We intend to either refinance the 3.750% Senior Notes prior to maturity, or use cash on hand, cash flow from operations, the Revolving Credit Agreement, or the BGC Credit Agreement to settle such amounts.

See Note 13—“Related Party Transactions” and Note 17—“Notes Payable and Other Borrowings” to our unaudited Condensed Consolidated Financial Statements in Part I, Item 1 of this Quarterly Report on Form 10-Q for information regarding our 3.750% Senior Notes.

4.375% Senior Notes due December 15, 2025

On August 28, 2020, BGC Partners filed a Registration Statement on Form S-4, which was declared effective by the SEC on September 8, 2020. On September 9, 2020, BGC Partners launched an exchange offer in which holders of the BGC Partners 4.375% Senior Notes, issued in a private placement on July 10, 2020, could exchange such notes for new registered notes with substantially identical terms. The exchange offer closed on October 14, 2020, at which point the initial BGC Partners 4.375% Senior Notes were exchanged for new registered notes with substantially identical terms.

The outstanding aggregate principal amount of BGC Group 4.375% Senior Notes, which are general senior unsecured obligations of BGC Group, was $288.1 million as of June 30, 2024. There were no BGC Group 4.375% Senior Notes outstanding as of June 30, 2023. BGC Group recorded interest expense related to the BGC Group 4.375% Senior Notes of $3.3 million for the three months ended June 30, 2024. BGC Group recorded interest expense related to the BGC Group 4.375% Senior Notes of $6.7 million for the six months ended June 30, 2024. BGC Group did not record interest expense related to the BGC Group 4.375% Senior Notes for the three and six months ended June 30, 2023.

The outstanding aggregate principal amount of BGC Partners 4.375% Senior Notes, which are general senior unsecured obligations of BGC Partners, was $11.9 million as of June 30, 2024. The outstanding aggregate principal amount of BGC Partners 4.375% Senior Notes was $300.0 million as of June 30, 2023. BGC Partners recorded interest expense related to the BGC Partners 4.375% Senior Notes of $0.1 million and $3.4 million, respectively, for the three months ended June 30, 2024 and 2023. BGC Partners recorded interest expense related to the BGC Partners 4.375% Senior Notes of $0.3 million and $6.9 million, respectively, for the six months ended June 30, 2024 and 2023.

See Note 13—“Related Party Transactions” and Note 17—“Notes Payable and Other Borrowings” to our unaudited Condensed Consolidated Financial Statements in Part I, Item 1 of this Quarterly Report on Form 10-Q for information regarding our 4.375% Senior Notes.

8.000% Senior Notes due May 25, 2028

The outstanding aggregate principal amount of BGC Group 8.000% Senior Notes, which are general senior unsecured obligations of BGC Group, was $347.2 million as of June 30, 2024. There were no BGC Group 8.000% Senior Notes outstanding as of June 30, 2023. BGC Group recorded interest expense related to the BGC Group 8.000% Senior Notes of $7.1 million for the three months ended June 30, 2024. BGC Group recorded interest expense related to the BGC Group 8.000% Senior Notes of $14.3 million for the six months ended June 30, 2024. BGC Group did not record interest expense related to the BGC Group 8.000% Senior Notes for the three and six months ended June 30, 2023.

The outstanding aggregate principal amount of BGC Partners 8.000% Senior Notes, which are general senior unsecured obligations of BGC Partners, was $2.8 million as of June 30, 2024. The outstanding aggregate principal amount of BGC Partners 8.000% Senior Notes was $350.0 million as of June 30, 2023. BGC Partners recorded interest expense related to the BGC Partners 8.000% Senior Notes of $0.1 million and $2.8 million, respectively, for the three months ended June 30, 2024 and 2023. BGC Partners recorded interest expense related to the BGC Partners 8.000% Senior Notes of $0.1 million and $2.8 million, respectively, for the six months ended June 30, 2024 and 2023.

See Note 13—“Related Party Transactions” and Note 17—“Notes Payable and Other Borrowings” to our unaudited Condensed Consolidated Financial Statements in Part I, Item 1 of this Quarterly Report on Form 10-Q for information regarding our 8.000% Senior Notes.

6.600% Senior Notes due June 10, 2029

The outstanding aggregate principal amount of BGC Group 6.600% Senior Notes, which are general senior unsecured obligations of BGC Group, was $500.0 million as of June 30, 2024. There were no BGC Group 6.600% Senior Notes outstanding as of June 30, 2023. BGC Group recorded interest expense related to the BGC Group 6.600% Senior Notes of $1.9 million for the three and six months ended June 30, 2024. BGC Group did not record interest expense related to the BGC Group 6.600% Senior Notes for the three and six months ended June 30, 2023.

See Note 13—“Related Party Transactions” and Note 17—“Notes Payable and Other Borrowings” to our unaudited Condensed Consolidated Financial Statements in Part I, Item 1 of this Quarterly Report on Form 10-Q for information regarding the BGC Group 6.600% Senior Notes.

Collateralized Borrowing

On April 8, 2019, BGC Partners entered into a $15.0 million secured loan arrangement, under which it pledged certain fixed assets as security for a loan. This arrangement incurred interest at a fixed rate of 3.77% and matured on April 8, 2023, at which point the loan was repaid in full; therefore, there were no borrowings as of June 30, 2024 and December 31, 2023. The interest expense related to this secured loan arrangement for the three months ended June 30, 2023 was nil.

On April 19, 2019, BGC Partners entered into a $10.0 million secured loan arrangement, under which it pledged certain fixed assets as security for a loan. This arrangement incurred interest at a fixed rate of 3.89% and matured on April 19, 2023, at which point the loan was repaid in full; therefore, there were no borrowings as of June 30, 2024 and December 31, 2023. The interest expense related to this secured loan arrangement for the three months ended June 30, 2023 was nil.

See Note 17—“Notes Payable and Other Borrowings” to our unaudited Condensed Consolidated Financial Statements in Part I, Item 1 of this Quarterly Report on Form 10-Q for information regarding our collateralized borrowings.

Weighted-average Interest Rate

For the three months ended June 30, 2024 and 2023, the weighted-average interest rate of our total Notes payable and other borrowings, which include our Revolving Credit Agreement, Company Debt Securities, BGC Credit Agreement, and collateralized borrowings, was 5.88% and 5.47%, respectively.

Short-term Borrowings

On August 22, 2017, BGC Partners entered into a committed unsecured loan agreement with Itau Unibanco S.A. The agreement provided for short-term loans of up to $4.0 million (BRL 20.0 million). Borrowings under this agreement bore interest at the Brazilian Interbank offering rate plus 3.20%. During June 2023, the borrowings under this agreement were repaid in full, and the loan was terminated. As of June 30, 2024 and December 31, 2023, there were no borrowings outstanding under the agreement. BGC Partners recorded interest expense related to the agreement of $0.1 million and $0.2 million, respectively, for the three and six months ended June 30, 2023.

On August 23, 2017, BGC Partners entered into a committed unsecured credit agreement with Itau Unibanco S.A. The agreement provided for an intra-day overdraft credit line up to $9.0 million (BRL 50.0 million). On August 20, 2021, the agreement was renegotiated, increasing the credit line to $10.8 million (BRL 60.0 million). On May 22, 2023 the agreement was renegotiated, increasing the credit line to $12.6 million (BRL 70.0 million.) This agreement is renewable every 90 days and bears a fee of 1.32% per year. As of June 30, 2024 and December 31, 2023, there were no borrowings outstanding under this agreement. The bank fees related to the agreement were nil for each of the three months ended June 30, 2024 and 2023. The bank fees related to the agreement were $0.1 million for each of the six months ended June 30, 2024 and 2023.

See Note 17—“Notes Payable and Other Borrowings” to our unaudited Condensed Consolidated Financial Statements in Part I, Item 1 of this Quarterly Report on Form 10-Q for information regarding our short-term borrowings.

DEBT REPURCHASE PROGRAM

On June 11, 2020, BGC Partners’ Board of Directors and its Audit Committee authorized a debt repurchase program for the repurchase by the Company of up to $50.0 million of Company Debt Securities, and on July 1, 2023, BGC Group’s Board of Directors and its Audit Committee authorized a debt repurchase program for the repurchase by the Company of up to $50.0 million of Company Debt Securities. Repurchases of Company Debt Securities, if any, are expected to reduce future cash interest payments, as well as future amounts due at maturity or upon redemption.

Under the authorization, the Company may make repurchases of Company Debt Securities for cash from time to time in the open market or in privately negotiated transactions upon such terms and at such prices as management may determine. Additionally, the Company is authorized to make any such repurchases of Company Debt Securities through CF&Co (or its affiliates), in its capacity as agent or principal, or such other broker-dealers as management shall determine to utilize from time to time, and such repurchases shall be subject to brokerage commissions which are no higher than standard market commission rates.

As of June 30, 2024, the Company had $50.0 million remaining under its debt repurchase authorization.

LIQUIDITY ANALYSIS

We consider our Liquidity, a non-GAAP financial measure, to be comprised of the sum of Cash and cash equivalents, Reverse Repurchase Agreements, and Financial instruments owned, at fair value, less Securities loaned and Repurchase Agreements. We consider liquidity to be an important metric for determining the amount of cash that is available or that could be readily available to the Company on short notice. The discussion below describes the key components of our Liquidity analysis. We believe our cash, cash flows, and financing arrangements are sufficient to support our cash requirements for the next twelve months and beyond.

We consider the following in analyzing changes in our Liquidity:

• Our Liquidity analysis includes a comparison of our Consolidated net income (loss) adjusted for certain non-cash items (e.g., Equity-based compensation) as presented on the cash flow statement. Dividends are payments made to our holders of common shares and are related to earnings from prior periods. These timing differences will impact our cash flows in a given period;
• Our investing and funding activities represent a combination of our capital raising activities, including short-term borrowings and repayments, BGC Class A common stock repurchases and, previously, partnership unit redemptions, purchases and sales of securities, dispositions, and other investments (e.g., acquisitions, forgivable loans to new brokers and capital expenditures—all net of depreciation and amortization);
• Our securities settlement activities primarily represent deposits with clearing organizations;
• Other changes in working capital represent changes primarily in receivables and payables and accrued liabilities that impact our Liquidity; and
• Changes in Reverse Repurchase Agreements and Financial instruments owned, at fair value may result from additional cash investments or sales, which will be offset by a corresponding change in Cash and cash equivalents and, accordingly, will not result in a change in our Liquidity. Conversely, changes in the market value of such securities are reflected in our earnings or other comprehensive income (loss) and will result in changes in our Liquidity.

As of June 30, 2024, the Company and its consolidated subsidiaries had $571.7 million of Cash and cash equivalents. The Company and its consolidated subsidiaries held securities worth $194.0 million within their Liquidity position as of June 30, 2024. As of June 30, 2024, the Company and its consolidated subsidiaries had $6.6 million of Repurchase Agreements, which matured on July 1, 2024. U.S. Treasury securities were provided as collateral.

Discussion of the six months ended June 30, 2024

The table below presents our Liquidity Analysis as of June 30, 2024 and December 31, 2023:

(in thousands)

The $57.6 million increase in our Liquidity position from $701.4 million as of December 31, 2023 to $759.1 million as of June 30, 2024 was primarily related to a $148.1 million increase in Financial instruments owned, at fair value due to the Company purchasing treasury bills that mature on December 12, 2024 and had a carrying value of $146.5 million as of June 30, 2024. Furthermore, Cash and cash equivalents decreased by $83.9 million. The Company received $171.7 million of contributions from the FMX Equity Partners, which the Company used to purchase $146.1 million of treasury bills. The remaining movement in the Cash and cash equivalents balance is primarily due to the issuance of an aggregate of $500.0 million principal amount of the BGC Group 6.600% Senior Notes, which were partially offset by the Company’s repayment of $240.0 million of borrowings on the Revolving Credit Agreement and Cantor borrowing $180.0 million from the Company under the BGC Credit Agreement, share repurchases of $147.9 million, ordinary movements in working capital, capitalized expenditures, tax payments, dividends, and our continued investment in Fenics Growth Platforms and cash flows used in operations.

Discussion of the six months ended June 30, 2023

The table below presents our Liquidity Analysis as of June 30, 2023 and December 31, 2022:

(in thousands)

The $242.5 million increase in our Liquidity position from $524.3 million as of December 31, 2022 to $766.8 million as of June 30, 2023, was primarily related to our issuance of $350.0 million principal amount of BGC Partners 8.000% Senior Notes, our Reverse Repurchase Agreements, and cash flow from operations, partially offset by ordinary movements in working capital, the acquisition of Trident, tax payments, dividends and distributions, share repurchases, and our continued investments in Fenics Growth Platforms.

CREDIT RATINGS

As of June 30, 2024, our public long-term credit ratings and associated outlooks were as follows:

Credit ratings and associated outlooks are influenced by a number of factors, including, but not limited to: operating environment, earnings and profitability trends, the prudence of funding and liquidity management practices, balance sheet size/composition and resulting leverage, cash flow coverage of interest, composition and size of the capital base, available liquidity, outstanding borrowing levels and the firm’s competitive position in the industry. A credit rating and/or the associated outlook can be revised upward or downward at any time by a rating agency if such rating agency decides that circumstances warrant such a change. Any downgrade in our credit ratings and/or the associated outlooks could adversely affect the availability of debt financing on terms acceptable to us, as well as the cost and other terms upon which we are able to obtain any such financing. In addition, credit ratings and associated outlooks may be important to customers or counterparties when we compete in certain markets and when we seek to engage in certain transactions. In connection with certain agreements, we may be required to provide additional collateral in the event of a credit ratings downgrade.

CLEARING CAPITAL

In November 2008, we entered into the Clearing Capital Agreement with Cantor to clear U.S. Treasury and U.S. government agency securities transactions on our behalf. In June 2020, the Clearing Capital Agreement was amended to cover Cantor providing clearing services in all eligible financial products to us and not just U.S. Treasury and U.S. government agency securities. Pursuant to the terms of this agreement, so long as Cantor is providing clearing services to us, Cantor shall be entitled to request from us cash or other collateral acceptable to Cantor in the amount reasonably requested by Cantor under the Clearing Capital Agreement or Cantor will post cash or other collateral on our behalf for a commercially reasonable charge. On June 7, 2024, we amended the Clearing Capital Agreement to modify the rate charged Cantor for posting margin in respect of trades cleared on behalf of the Company to a rate equal to Cantor’s cost of funding such margin through a draw on a third party credit facility provided to Cantor, for which the use of proceeds is to finance clearinghouse margin deposits and related transactions. The Clearing Capital Agreement amendment also assigned BGC Partners’ rights and obligations thereunder to BGC Group.

During the three months ended June 30, 2024 and 2023, the Company was charged $0.9 million and $0.5 million, respectively, by Cantor for the cash or other collateral posted by Cantor on BGC’s behalf. During the six months ended June 30, 2024 and 2023, the Company was charged $1.9 million and $0.8 million, respectively, by Cantor for the cash or other collateral posted by Cantor on BGC’s behalf. Cantor had not requested any cash or other property from the Company as collateral as of June 30, 2024.

REGULATORY REQUIREMENTS

Our Liquidity and available cash resources are restricted by regulatory requirements applicable to our operating subsidiaries. Many of these regulators, including U.S. and non-U.S. government agencies and self-regulatory organizations, as well as state securities commissions in the U.S., are empowered to conduct administrative proceedings that can result in civil and criminal judgments, settlements, fines, penalties, injunctions, enhanced oversight, remediation, or other relief.

In addition, self-regulatory organizations, such as FINRA and the NFA, along with statutory bodies such as the FCA, the SEC, and the CFTC, require strict compliance with their rules and regulations. The requirements imposed by regulators are designed to ensure the integrity of the financial markets and to protect customers and other third parties who deal with broker-dealers and are not designed to specifically protect stockholders. These regulations often serve to limit our activities, including through net capital, customer protection and market conduct requirements.

The final phase of Basel III (unofficially called “Basel IV”) is a global prudential regulatory standard designed to make banks more resilient and increase confidence in the banking system. Its wide scope includes reviewing market, credit and operational risk along with targeted changes to leverage ratios. Basel IV includes updates to the calculation of bank capital requirements with the aim of making outcomes more comparable across banks globally.

The FCA is the relevant statutory regulator in the U.K. The FCA’s objectives are to protect customers, maintain the stability of the financial services industry and promote competition between financial services providers. It has broad rule-making, investigative and enforcement powers derived from the Financial Services and Markets Act 2000 and subsequent derivative legislation and regulations.

In January 2022, the FCA introduced a new Internal Capital and Risk Assessment (ICARA) process as a replacement for the Internal Capital Adequacy Assessment Process (ICAAP). The ICARA process incorporates business model assessment, forecasting and stress testing, recovery planning and wind-down planning. All firms were required to submit their proposed ICARA documentation by March 31, 2023, and then review its adequacy on an annual basis thereafter, after which the FCA provide feedback that may require further documentation and may lead to a change in capital requirements. The adoption of these proposed rules could restrict the ability of our large bank and broker-dealer customers to operate trading businesses and to maintain current capital market exposures under the present structure of their balance sheets, and will cause these entities to need to raise additional capital in order to stay active in our marketplaces.

In July 2023, the FCA further ensured that Consumer Duty is at the heart of every financial institution by rolling out Principle 12 specifically related to Consumer Duty, where a firm must act to deliver good outcomes for retail customers. This initiative is poised to redefine the relationship between consumers and financial institutions, where the FCA has demanded financial institutions foster a culture of trust, transparency, and accountability. Under Consumer Duty, the onus has shifted to financial institutions to prioritize their customers’ best interest in every consideration made by the financial institution (the entire customer life cycle) including demonstration and evidence that the product/service/action is in the best interest of the customer. Although not immediately applicable to our business as we do not conduct business directly with the retail sector, we are conscious of the impact that this will have on underlying clients who have obligations to fulfil. In so doing, they may require our firm to provide additional reporting in order to help them evidence their obligations.

In addition, the majority of our other foreign subsidiaries are subject to similar regulation by the relevant authorities in the countries in which they do business. Certain other of our foreign subsidiaries are required to maintain non-U.S. net capital requirements. For example, in Hong Kong, BGC Securities (Hong Kong), LLC, GFI (HK) Securities LLC and Sunrise Brokers (Hong Kong) Limited are regulated by the Securities and Futures Commission. BGC Capital Markets (Hong Kong), Limited and GFI (HK) Brokers Ltd are regulated by The Hong Kong Monetary Authority. All are subject to Hong Kong net capital requirements. In France, Aurel BGC and BGC France Holdings; in Australia, BGC Partners (Australia) Pty Limited and Fixed Income Solutions Pty Limited; in Japan, BGC Shoken Kaisha Limited’s Tokyo branch; in Singapore, BGC Partners (Singapore) Limited, GFI Group Pte Ltd and Ginga Global Markets Pte Ltd; in Korea, BGC Capital Markets & Foreign Exchange Broker (Korea) Limited and GFI Korea Money Brokerage Limited; in Philippines, GFI Group (Philippines) Inc. and in Brazil, BGC Liquidez Distribuidora De Titulos E Valores Mobiliarios Ltda., all have net capital requirements imposed upon them by local regulators.

These subsidiaries may also be prohibited from repaying the borrowings of their parents or affiliates, paying cash dividends, making loans to their parent or affiliates or otherwise entering into transactions, in each case, which may result in a significant reduction in their regulatory capital position without prior notification or approval from their principal regulator. See Note 21—“Regulatory Requirements” to our unaudited Condensed Consolidated Financial Statements in Part I, Item 1 of this Quarterly Report on Form 10-Q for further details on our regulatory requirements.

As of June 30, 2024, $695.6 million of net assets were held by regulated subsidiaries. As of June 30, 2024, these subsidiaries had aggregate regulatory net capital, as defined, in excess of the aggregate regulatory requirements, as defined, of $378.7 million.

BGC Derivative Markets and GFI Swaps Exchange, our subsidiaries, operate as SEFs. Mandatory Dodd-Frank Act compliant execution on SEFs by eligible U.S. persons for “made available to trade” products, and a wide range of other rules relating to the execution and clearing of derivative products have been implemented. We also own ELX, which became a dormant contract market on July 1, 2017 and in July 2021, we completed the purchase of the CX Futures Exchange (now FMX Futures Exchange) from Cantor, which represents our futures exchange and related clearinghouse. These rules require authorized execution facilities to maintain robust front-end and back-office IT capabilities and to make large and ongoing technology investments. These execution facilities may be supported by a variety of Voice and auction-based execution methodologies, and our Hybrid and Fully Electronic trading capability have performed strongly in this regulatory environment.

Much of our global derivatives volumes continue to be executed by non-U.S. based clients outside the U.S. and subject to local prudential regulations. As such, we will continue to operate a number of European regulated venues in accordance with EU or U.K. legislation and licensed by the FCA or EU-based national supervisors. These venues are also operated for non-derivative instruments for these clients. MiFID II was published by the European Securities and Markets Authority in September 2015, and implemented in January 2018 and introduced important infrastructural changes.

MiFID II requires a significant part of the market in these instruments to trade on trading venues subject to transparency regimes, not only in pre- and post-trade prices, but also in fee structures and access. In addition, it has impacted a number of key areas, including corporate governance, transaction reporting, pre- and post-trade transparency, technology synchronization, best execution and investor protection.

MiFID II was intended to help improve the functioning of the EU single market by achieving a greater consistency of regulatory standards. By design, therefore, it was intended that EU member states should have very similar regulatory regimes in relation to the matters addressed to MiFID. MiFID II has also introduced a new regulated execution venue category called an OTF that captures much of the Voice-and Hybrid-oriented trading in the EU. Much of our EU derivatives and fixed income execution business now takes place on OTFs. Further to its decision to leave the EU, the U.K. has implemented MIFID II’s requirements into its own domestic legislation. Brexit may impact future market structures and MiFID II rulemaking and implementation due to potential changes in mutual passporting and equivalence arrangements between the U.K. and EU member states (for further information see “Overview and Business Environment—Financial Services Industry—Brexit” herein).

In addition, the GDPR came into effect in the EU on May 25, 2018 (with the equivalent in the U.K.) and creates new compliance obligations in relation to personal data. The GDPR may affect our practices, and will increase financial penalties for non-compliance significantly.

Apart from some minor non-material changes, at this time there has not been any legislation from the EU Commission or the U.K. government that has materially changed how the U.K. and EU approach financial regulation since MiFID II and the implementation of Brexit. Although divergence of U.K. regulation from EU regulation may occur, there has been no firm legislative change signaled or published by the FCA or the U.K. government. While we generally believe the net impact of the rules and regulations are positive for our business, it is possible that unintended consequences of the rules and regulations may materially adversely affect us in ways yet to be determined.

See “Regulation” included in Part I, Item 1 of our Annual Report on Form 10-K for the year ended December 31, 2023 for additional information related to our regulatory environment.

EQUITY

As of June 30, 2024, we had 379.6 million shares of BGC Class A common stock and 109.5 million shares of BGC Class B common stock outstanding. Additional disclosures regarding our accounting for stock transactions and unit redemptions are provided in Note 7—“Stock Transactions and Unit Redemptions” to the Company’s unaudited Condensed Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q.

The weighted-average share counts, including securities that were anti-dilutive for our earnings per share calculations, for the three months ended June 30, 2024 were as follows (in thousands):

1Common stock consisted of shares of BGC Class A common stock, shares of BGC Class B common stock and contingent shares of our Class A common stock for which all necessary conditions have been satisfied except for the passage of time. For the three months ended June 30, 2024, the weighted-average number of shares of BGC Class A common stock was 365.4 million, the weighted-average number of shares of BGC Class B common stock was 109.5 million, and the weighted-average number of contingent shares of our Class A common stock for which all necessary conditions have been satisfied except for the passage of time was 0.4 million.

2For the three months ended June 30, 2024, 15.9 million of potentially dilutive securities were not included in the computation of fully diluted EPS because their effect would have been anti-dilutive. Anti-dilutive securities for the three months ended June 30, 2024, included $15.5 million of participating RSUs and $0.4 million of participating restricted shares of BGC Class A common stock. Also as of June 30, 2024, 63.1 million shares of contingent BGC Class A common stock, non-participating RSUs, and non-participating restricted shares of BGC Class A common stock were excluded from fully diluted EPS computations because the conditions for issuance had not been met by the end of the period. The contingent BGC Class A common stock is recorded as a liability and included in “Accounts payable, accrued and other liabilities” in our unaudited Condensed Consolidated Statements of Financial Condition as of June 30, 2024.

Registration Statements

Our effective March 2021 Form S-3 Registration Statement was originally filed on March 8, 2021, with respect to the issuance and sale of up to an aggregate of $300.0 million shares of BGC Class A common stock from time to time on a delayed or continuous basis. As of June 30, 2024, the Company had not issued shares of BGC Class A common stock under the March 2021 Form S-3. We also entered into the July 2023 Sales Agreement, under which we agreed to pay CF&Co 2% of the gross proceeds from the sale of shares. CF&Co is a wholly owned subsidiary of Cantor and an affiliate of BGC. For additional information on our CEO Program sales agreement, see Note 13—“Related Party Transactions” to our unaudited Condensed Consolidated Financial Statements in Part I, Item 1 of this Quarterly Report on Form 10-Q.

We intend to use the net proceeds of any shares of BGC Class A common stock sold under our CEO Program for general corporate purposes, including for potential acquisitions, repurchases of shares of BGC Class A common stock from executive officers and other employees of ours or our subsidiaries and of Cantor and its affiliates. Prior to the Corporate Conversion, we also used the net proceeds for redemption of LPUs and FPUs in BGC Holdings. Certain of such executive officers and other employees of ours or our subsidiaries and of Cantor and its affiliates will be expected to use the proceeds from such sales to repay outstanding loans issued by, or credit enhanced by, Cantor or BGC.

Our effective 2019 Form S-4 Registration Statement was originally filed on September 13, 2019, with respect to the offer and sale of up to 20 million shares of BGC Class A common stock from time to time in connection with business combination transactions, including acquisitions of other businesses, assets, properties or securities. As of June 30, 2024, the Company had issued an aggregate of 2.8 million shares of BGC Class A common stock under the 2019 Form S-4 Registration Statement.

Our effective DRIP Registration Statement was originally filed on June 24, 2011, with respect to the offer and sale of up to 10 million shares of BGC Class A common stock under the DRIP. As of June 30, 2024, the Company had issued 0.8 million shares of BGC Class A common stock under the DRIP.

Our effective Equity Plan Registration Statement was originally filed on July 3, 2023 with respect to registering the offer and sale of up to 600 million shares of BGC Class A common stock under the BGC Group Equity Plan. The BGC Group Equity Plan provides for a maximum of 600 million shares of BGC Class A common stock that may be delivered or cash settled pursuant to the exercise or settlement of awards granted under the BGC Group Equity Plan. As of June 30, 2024, the limit on the aggregate number of shares authorized to be delivered under the BGC Group Equity Plan allowed for the grant of future awards relating to 455.0 million shares of BGC Class A common stock.

CONTINGENT PAYMENTS RELATED TO ACQUISITIONS

Since 2016, the Company has completed acquisitions whose purchase price included an aggregate of approximately 3.3 million shares of the BGC Class A common stock (with an acquisition date fair value of approximately $13.5 million), 0.1 million LPUs (with an acquisition date fair value of approximately $0.2 million), 0.2 million RSUs (with an acquisition date fair value of approximately $1.2 million) and $43.1 million in cash that may be issued contingent on certain targets being met through 2027.

As of June 30, 2024, the Company has issued 1.9 million shares of BGC Class A common stock, 0.2 million of RSUs and paid $54.4 million in cash related to such contingent payments.

As of June 30, 2024, there are 0.4 million shares of BGC Class A common stock, including contingent shares for which all necessary conditions have been satisfied except for the passage of time and which are included in our computation of basic EPS, as well as 0.5 million shares of BGC Class A common stock which will be issued if related targets are met and $3.4 million in cash which will be issued if related targets are met, net of forfeitures and other adjustments.

LEGAL PROCEEDINGS

On August 10, 2023, the shareholder derivative suit concerning our 2017 acquisition of Berkeley Point (as described below) was fully and finally decided in favor of the defendants, with the Delaware Chancery Court issuing a post-trial decision denying the plaintiffs’ causes of action and finding that the transaction was entirely fair to our shareholders and the Delaware Supreme Court affirming that result.

On March 9, 2023, a purported class action complaint was filed against Cantor, BGC Holdings, and Newmark Holdings in the U.S. District Court for the District of Delaware (Civil Action No. 1:23-cv-00265). The collective action, which was filed by seven former limited partners of the defendants on their own behalf and on behalf of other similarly situated limited partners, alleges a claim for breach of contract against all defendants on the basis that the defendants failed to make payments due under the relevant partnership agreements. Specifically, the plaintiffs allege that the non-compete and economic forfeiture provisions upon which the defendants relied to deny payment are unenforceable under Delaware law. The plaintiffs allege a second claim against Cantor and BGC Holdings for antitrust violations under the Sherman Act on the basis that the Cantor and BGC Holdings partnership agreements constitute unreasonable restraints of trade. In that regard, the plaintiffs allege that the non-compete and economic forfeiture provisions of the Cantor and BGC Holdings partnership agreements, as well as restrictive covenants included in partner separation agreements, cause anticompetitive effects in the labor market, insulate Cantor and BGC Holdings from competition, and limit innovation. The plaintiffs seek a determination that the case may be maintained as a class action, an injunction prohibiting the allegedly anticompetitive conduct, and monetary damages of at least $5.0 million. On April 28, 2023, defendants filed a motion to dismiss the complaint. In response, the plaintiffs filed an amended complaint. On July 14, 2023, defendants filed a motion to dismiss the amended complaint. The plaintiffs then filed a second amended complaint in March 2024. Defendants’ motion to dismiss the second amended complaint is fully briefed as of May 2024 and a decision is forthcoming. The Company believes the lawsuit has no merit. However, as with any litigation, the outcome cannot be determined with certainty.

Other legal proceedings

On February 16, 2024, an alleged Company shareholder, Martin J. Siegel, filed a putative class action lawsuit against Cantor Fitzgerald, LP and Howard W. Lutnick in the Delaware Court of Chancery, asserting that the Corporate Conversion was unfair to Class A shareholders of BGC Partners, Inc. because it increased Cantor’s percentage voting control over the Company. The suit is captioned Martin J. Siegel v. Cantor Fitzgerald, LP, C.A. 2024-0146-LWW. Defendants moved to dismiss the complaint on April 22, 2024 and briefing of that motion is ongoing. While the lawsuit is in its early stages and does not name the Company as a party, the Company believes the action lacks merit.

UNIT REDEMPTIONS AND EXCHANGES, AND EMPLOYMENT ARRANGEMENTS—EXECUTIVE OFFICERS

On January 2, 2024, Mr. Merkel sold 136,891 shares of Class A common stock to the Company in an exempt transaction made pursuant to Rule 16b-3 under the Exchange Act. The sale price per share of $6.98 was the closing price of a share of Class A common stock on January 2, 2024. The transaction was approved by the Audit and Compensation Committees of the Board and was made pursuant to the Company’s stock buyback authorization.

On September 21, 2023, Mr. Windeatt sold 474,808 shares of Class A common stock to the Company in an exempt transaction made pursuant to Rule 16b-3 under the Exchange Act. The sale price per share of $5.29 was the closing price of a share of Class A common stock on September 21, 2023. The transaction was approved by the Audit Committee and the Compensation Committee of the Board and was made pursuant to the Company’s stock buyback authorization.

On June 8, 2023, the Company repurchased all of Mr. Windeatt’s 128,279 exchangeable BGC Holdings LPUs at a price of $4.79 per unit, which was the closing price of a share of our Class A common stock on June 8, 2023. The Compensation Committee granted Mr. Windeatt 128,279 non-exchangeable BGC Holdings LPUs on April 1, 2021. Pursuant to the exchange rights schedule of the grant, on April 1, 2023, the 128,279 non-exchangeable BGC Holdings LPUs became immediately exchangeable.

In connection with the Corporate Conversion, on June 2, 2023 Mr. Merkel sold 150,000 shares of Class A common stock to BGC Partners at $4.21 per share, the closing price of a share of Class A common stock on June 2, 2023. The transaction was approved by the Audit and Compensation Committees of the Board of BGC Partners and was made pursuant to BGC Partners’ stock buyback authorization.

In connection with the Corporate Conversion, on May 18, 2023, the BGC Partners Compensation Committee approved the redemption of all of the non-exchangeable BGC Holdings units held by Mr. Merkel at that time. On May 18, 2023, Mr. Merkel’s 148,146 NPSU-CVs, 33,585 PSU-CVs, and 74,896 PSUs were redeemed for zero and an aggregate of 256,627 shares of Class A common stock were granted to Mr. Merkel, and 148,146 NPPSU-CVs with a total determination amount of $681,250 and 33,585 PPSU-CVs with a total determination amount of $162,500 were redeemed for an aggregate cash payment of $843,750. After deduction of shares of BGC Class A common stock to satisfy applicable tax withholding through the surrender of shares of BGC Class A common stock valued at $4.61 per share, Mr. Merkel received 196,525 net shares of Class A common stock.

Since Mr. Lutnick had previously repeatedly waived his rights under the Standing Policy, as of May 18, 2023 his rights had accumulated for 7,879,736 non-exchangeable PSUs, and 103,763 non-exchangeable PPSUs with a determination amount of $474,195. Due to the May 18, 2023 monetization of all of Mr. Merkel’s then-remaining non-exchangeable BGC Holdings units, on such date Mr. Lutnick received additional incremental monetization rights for his then-remaining 3,452,991 non-exchangeable PSUs, and 1,348,042 non-exchangeable PPSUs with a determination amount of $6,175,805.

In connection with the Corporate Conversion and, as a result of the monetization event for Mr. Merkel, on May 18, 2023 Mr. Lutnick elected to exercise in full his monetization rights under the Standing Policy, which he had previously waived in prior years. All of the non-exchangeable BGC Holdings units that Mr. Lutnick held at that time were monetized as follows: 11,332,727 PSUs were redeemed for zero and 11,332,727 shares of Class A common stock were granted to Mr. Lutnick, and 1,451,805 PPSUs with an aggregate determination amount of $6,650,000 were redeemed for an aggregate cash payment of $6,650,000. After deduction of applicable tax withholding through the surrender of shares of BGC Class A common stock valued at $4.61 per share, Mr. Lutnick received 5,710,534 net shares of Class A common stock.

On May 18, 2023, Mr. Lutnick also exchanged his then-remaining 520,380 exchangeable PSUs for 520,380 shares of Class A common stock. After deduction of applicable tax withholding through the surrender of shares of BGC Class A common stock valued at $4.61 per share, Mr. Lutnick received 232,610 net shares of Class A common stock. In addition, on May 18, 2023, Mr. Lutnick’s then-remaining 1,474,930 non-exchangeable HDUs were redeemed for a cash capital account payment of $9,148,000, $2.1 million of which was paid by BGC with the remainder paid by Newmark Group, Inc. As a result of the various transactions on May 18, 2023 described above, on May 18, 2023, Mr. Lutnick no longer held any limited partnership units of BGC Holdings.

On April 18, 2023, the Dr. Bell sold 21,786 shares of Class A common stock to the Company. The sale price per share of $4.59 was the closing price of a share of Class A common stock on April 18, 2023. The transaction was approved by the Audit Committee and the Compensation Committee of the Board and was made pursuant to the Company’s stock buyback authorization.

Mr. Windeatt 2023 Deed of Amendment

On July 12, 2023, Mr. Windeatt executed the 2023 Deed of Amendment with the U.K. Partnership which amends his prior executed Deed of Adherence with the U.K. Partnership regarding the terms of his employment. Under the 2023 Deed of Amendment, the initial period of Mr. Windeatt’s membership in the U.K. Partnership was extended from September 30, 2025 to December 31, 2028. In addition, under the 2023 Deed of Amendment, commencing January 1, 2027, either party may terminate the Deed by giving written notice to the other party at least 24 months prior to the expiration of the initial period. Mr. Windeatt’s membership, unless terminated earlier in accordance with the terms of the Deed, will continue following December 31, 2028 on the same terms and conditions set forth in the Deed until written notice to terminate is provided and the 24-month notice period expires.

Pursuant to the 2023 Deed of Amendment, Mr. Windeatt is also entitled to an increase in drawings from an aggregate amount of £600,000 per year to an aggregate amount of £700,000 per year effective January 1, 2023, which shall be reviewed by the Compensation Committee annually. Mr. Windeatt is also eligible for additional allocations of the U.K. Partnership’s profits, subject to the approval of the Compensation Committee.

In connection and in consideration for Mr. Windeatt’s execution of the 2023 Deed of Amendment, on July 10, 2023 the Company approved accelerating the vesting of 720,509 of the Company’s RSUs held by Mr. Windeatt (calculated based upon the closing price of the Company’s Class A common stock on July 10, 2023 which was $4.45) and the vesting of $780,333 of the RSU Tax Account held by Mr. Windeatt. Such RSUs and RSU Tax Account amount vested on July 12, 2023, and the total value of this transaction was approximately $3,986,600.

MARKET SUMMARY

The following table provides certain volume and transaction count information for the quarterly periods indicated:

1Includes Fenics Integrated.

Note: Certain information may have been recast with current estimates to reflect changes in reporting methodology. Such revisions have no impact on the Company’s revenues or earnings.

Fully Electronic volume, including new products, was $14.5 trillion for the three months ended June 30, 2024, compared to $13.7 trillion for the three months ended June 30, 2023. Our Hybrid volume for the three months ended June 30, 2024 was $70.4 trillion, compared to $73.1 trillion for the three months ended June 30, 2023.

OFF-BALANCE SHEET ARRANGEMENTS

In the ordinary course of business, we enter into arrangements with unconsolidated entities, including variable interest entities. See Note 14—“Investments” to our unaudited Condensed Consolidated Financial Statements in Part I, Item 1 of this Quarterly Report on Form 10-Q for additional information related to our investments in unconsolidated entities.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

A summary of our “Critical Accounting Policies and Estimates” is included in Part II Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations of our Annual Report on Form 10-K for the year ended December 31, 2023. There were no significant changes made to the Company’s critical accounting policies from those reported in our Annual Report on Form 10-K for the year ended December 31, 2023.

RECENT ACCOUNTING PRONOUNCEMENTS

See Note 1—“Organization and Basis of Presentation” to our unaudited Condensed Consolidated Financial Statements in Part I, Item 1 of this Quarterly Report on Form 10-Q for information regarding recent accounting pronouncements.

CAPITAL DEPLOYMENT PRIORITIES, DIVIDEND POLICY AND REPURCHASE PROGRAM

BGC’s current capital allocation priorities are to use our liquidity to return capital to stockholders and to continue investing in the growth of our business. We have repurchased 21.9 million shares during the six months ended June 30, 2024.

Any dividends, if and when declared by our Board, will be paid on a quarterly basis. The dividend to our common stockholders is expected to be calculated based on a number of factors. No assurance can be made, however, that a dividend will be paid each quarter. The declaration, payment, timing, and amount of any future dividends payable by us will be at the sole discretion of our Board using the fully diluted share count.

We are a holding company, with no direct operations, and therefore we are able to pay dividends only from our available cash on hand and funds received from distributions from BGC U.S. OpCo and BGC Global OpCo. Our ability to pay dividends may also be limited by regulatory considerations as well as by covenants contained in financing or other agreements. In addition, under Delaware law, dividends may be payable only out of surplus, which is our net assets minus our capital (as defined under Delaware law), or, if we have no surplus, out of our net profits for the fiscal year in which the dividend is declared and/or the preceding fiscal year. Accordingly, any unanticipated accounting, tax, regulatory or other charges against net income may adversely affect our ability to declare and pay dividends. While we intend to declare and pay dividends quarterly, there can be no assurance that our Board will declare dividends at all or on a regular basis or that the amount of our dividends will not change.

OUR ORGANIZATIONAL STRUCTURE

Dual Class Equity Structure of BGC Group, Inc. We have a dual class equity structure, consisting of shares of BGC Class A common stock and BGC Class B common stock. We expect to retain and have no plans to change our dual class structure.

BGC Class A common stock. Each share of BGC Class A common stock is generally entitled to one vote on matters submitted to a vote of our stockholders. As of June 30, 2024, there were 415.4 million shares of BGC Class A common stock issued and 379.6 million shares outstanding. On June 21, 2017, Cantor pledged 10.0 million shares of BGC Class A common stock in connection with a partner loan program. On November 23, 2018, those shares of BGC Class A common stock were converted into 10.0 million shares of BGC Class B common stock and remain pledged in connection with the partner loan program, as amended and restated effective as of October 5, 2023 with such modifications thereto as necessary to reflect the Corporate Conversion.

From time to time, we may actively continue to repurchase shares of our Class A common stock including from Cantor, Newmark, our executive officers, other employees, partners and others.

BGC Class B common stock. Each share of BGC Class B common stock is generally entitled to the same rights as a share of BGC Class A common stock, except that on matters submitted to a vote of our stockholders, each share of BGC Class B common stock is entitled to 10 votes. The BGC Class B common stock generally votes together with the BGC Class A common stock on all matters submitted to a vote of our stockholders. As of June 30, 2024, Cantor and CFGM held an aggregate of 96.3 million shares of BGC Class B common stock, representing 88.0% of the outstanding shares of BGC Class B common stock and approximately 65.3% of our total voting power. As of June 30, 2024, Mr. Lutnick and individuals related to Mr. Lutnick owned 13.1 million shares of our outstanding Class B common stock, representing 12.0% of the outstanding shares of BGC Class B common stock and approximately 8.9% of our total voting power. Together, Cantor, CFGM, Mr. Lutnick and individuals related to Mr. Lutnick owned 100% of the outstanding shares of BGC Class B common stock and approximately 74.2% of our total voting power.

Shares of BGC Class B common stock are convertible into shares of BGC Class A common stock at any time in the discretion of the holder on a one-for-one basis. Accordingly, if Cantor, CFGM, Mr. Lutnick and individuals related to Mr. Lutnick converted all of their BGC Class B common stock into BGC Class A common stock on June 30, 2024, Cantor would have held 19.1% of the voting power of our outstanding capital stock, CFGM would have held 0.6% of the voting power, Mr. Lutnick and individuals related to Mr. Lutnick would have held 6.6% of the voting power, and the public stockholders would have held 73.8% of the voting power of our outstanding capital stock (and Cantor and CFGM’s indirect economic interests in BGC U.S. and BGC Global would remain unchanged).

As a result of the Corporate Conversion, 64.0 million Cantor units, including 5.7 million purchased on June 30, 2023, were converted into shares of BGC Group Class B common stock, subject to the terms and conditions of the Corporate Conversion Agreement, provided that a portion of the 64.0 million shares of BGC Group Class B common stock issued to Cantor will exchange into BGC Group Class A common stock in the event that BGC Group does not issue at least $75,000,000 in shares of BGC Group Class A or B common stock in connection with certain acquisition transactions prior to July 1, 2030, the seventh anniversary of the Corporate Conversion.

On July 2, 2023, Cantor distributed an aggregate of 15.8 million shares of Class B common stock held by it in satisfaction of its remaining deferred share distribution obligations pursuant to the April 2008 distribution rights shares and the February 2012 distribution rights shares. 14.0 million of the July 2023 distribution shares were distributed to satisfy April 2008 distribution rights shares and 1.8 million of the July 2023 distribution shares were distributed to satisfy February 2012 distribution rights shares. 15.4 million of the July 2023 distribution shares will remain Class B common stock in the hands of the recipient, and 0.4 million of such shares were converted into an equivalent number of shares of Class A common stock in the hands of the recipient pursuant to the terms of BGC Group’s Amended and Restated Certificate of Incorporation. Upon distribution of the July 2023 distribution shares, Cantor satisfied all obligations to deliver shares of common stock to satisfy the April 2008 distribution rights shares and February 2012 distribution rights shares.

Classes of Founding/Working Partner Interests and Limited Partnership Units Prior to the Corporate Conversion

Prior to the Corporate Conversion, our executives and front-office employees held partnership stakes in us and our subsidiaries and generally received their equity compensation through LPUs. Upon the closing of the Corporate Conversion, the BGC Holdings Limited Partnership Agreement was terminated, and the former stockholders of BGC Partners and former limited partners of BGC Holdings now participate in the economics of the BGC businesses through BGC Group. Following the Corporate Conversion, the equity portion of our compensation structure is no longer based upon the issuance of partnership units but instead based upon the use of equity awards, such as RSUs, issued under the Equity Plan in order to incentivize and retain our employees, executive officers, and directors.

Prior to the Corporate Conversion, while BGC Holdings limited partnership interests generally entitled our partners to participate in distributions of income from the operations of our business, upon leaving BGC Holdings (or upon any other redemption or purchase of such limited partnership interests as described below) any such partners were only entitled to receive over time, and provided he or she did not violate certain partner obligations, an amount for his or her BGC Holdings limited partnership interests that reflected such partner’s capital account or compensatory grant awards, excluding any goodwill or going concern value of our business, unless Cantor, in the case of the founding partners, and we, as the general partner of BGC Holdings at that time, otherwise determined. Prior to the Corporate Conversion, we also had the right to effect redemptions of BGC Holdings LPUs and FPUs and concurrently grant shares of our Class A common stock, or to grant our partners the right to exchange their BGC Holdings limited partnership interests for shares of our Class A common stock (if, in the case of founding partners, Cantor so determined and, in the case of working partners and limited partnership unit holders, if we, as the BGC Holdings general partner at that time, with Cantor’s consent, determined otherwise) and thereby allowed them to realize any higher value associated with our Class A common stock. Similar provisions with respect to Newmark Holdings limited partnership interests are contained in the Newmark Holdings limited partnership agreement.

Limited partnership interests in BGC Holdings (prior to the Corporate Conversion) and Newmark Holdings (received in connection with the Spin-Off) consist of: (i) “founding/working partner units” held by limited partners who are employees of the relevant company; (ii) “limited partnership units,” which consist of a variety of units that are generally held by employees such as REUs, RPUs, PSUs, PSIs, PSEs, HDUs, U.K. LPUs, APSUs, APSIs, APSEs, AREUs, ARPUs and N Units; (iii) “Cantor units” which are the exchangeable limited partnership interests held by Cantor entities; and (iv) Preferred Units, which are working partner units that may be awarded to holders of, or contemporaneous with, the grant of certain limited partnership units. These Preferred Units carried the same name as the underlying unit, with the insertion of an additional “P” to designate them as Preferred Units. Such Preferred Units could not be made exchangeable into BGC Class A common stock and accordingly were not included in the fully diluted share count. Each quarter, the net profits of BGC Holdings were allocated to such Preferred Units at a rate of either 0.6875% (which is 2.75% per calendar year) of the allocation amount assigned to them based on their award price, or such other amount as set forth in the award documentation, before calculation and distribution of the quarterly BGC Holdings distribution for the remaining BGC Holdings units. The Preferred Units were not entitled to participate in BGC Holdings distributions other than with respect to the Preferred Distribution.

Non-distributing partnership units, or N Units, carried the same name as the underlying unit with the insertion of an additional “N” to designate them as the N Unit type and were designated as NREUs, NPREUs, NLPUs, NPLPUs and NPPSUs. The N Units were not entitled to participate in BGC Holdings distributions, were not allocated any items of profit or loss and were not made exchangeable into shares of BGC Class A common stock. Subject to the approval of the Compensation Committee or its designee, certain N Units may have been converted into the underlying unit type (i.e., an NREU could be converted into an REU) and could then participate in BGC Holdings distributions, subject to terms and conditions determined by us as the general partner of BGC Holdings, in our sole discretion, including that the recipient continue to provide substantial services to us and comply with his or her partnership obligations.

BGC OpCos Partnership Structures

We are a holding company with no direct operations, and our business is operated through two operating partnerships, BGC U.S. OpCo, which holds our U.S. businesses, and BGC Global OpCo, which holds our non-U.S. businesses.

Prior to the Corporate Conversion, the limited partnership interests of the two operating partnerships were held by us and BGC Holdings, and the limited partnership interests of BGC Holdings were held by LPU holders, Founding Partners, and Cantor. We held the BGC Holdings general partnership interest and the BGC Holdings special voting limited partnership interest, which entitled us to remove and appoint the general partner of BGC Holdings, and served as the general partner of BGC Holdings, which entitled us to control BGC Holdings. BGC Holdings, in turn, held the BGC U.S. OpCo general partnership interest and the BGC U.S. OpCo special voting limited partnership interest, which entitled the holder thereof to remove and appoint the general partner of BGC U.S. OpCo, and the BGC Global OpCo general partnership interest and the BGC Global OpCo special voting limited partnership interest, which entitled the holder thereof to remove and appoint the general partner of BGC Global OpCo, and served as the general partner of BGC U.S. OpCo and BGC Global OpCo, all of which entitled BGC Holdings (and thereby us) to control each of BGC U.S. OpCo and BGC Global OpCo.

Since BGC Holdings held BGC U.S. OpCo limited partnership interests and BGC Global OpCo limited partnership interests, LPU holders, Founding Partners, and Cantor indirectly had interests in BGC U.S. OpCo limited partnership interests and BGC Global OpCo limited partnership interests. Further, in connection with the Separation and Distribution Agreement, limited partnership interests in Newmark Holdings were distributed to the holders of limited partnership interests in BGC Holdings, whereby each holder of BGC Holdings limited partnership interests who at that time held a BGC Holdings limited partnership interest received a corresponding Newmark Holdings limited partnership interest, equal in number to each holder’s BGC Holdings limited partnership interest divided by 2.2 (i.e., 0.4545 of a unit in Newmark Holdings). Accordingly, existing partners at the time of the Separation in BGC Holdings are also partners in Newmark Holdings and received corresponding units issued at the applicable ratio. Thus, such partners have an indirect interest in Newmark OpCo.

As a result of a series of transactions prior to and in anticipation of the Corporate Conversion, all BGC Holdings units held by Newmark employees were redeemed or exchanged, in each case, for shares of BGC Class A common stock or cash. Upon the closing of the Corporate Conversion, the BGC Holdings Limited Partnership Agreement was terminated, we became the owner of all of the limited partnership interests of the two BGC operating partnerships, and the former stockholders of BGC Partners and former limited partners of BGC Holdings now participate in the economics of the BGC businesses through BGC Group.

Corporate Conversion

See “Overview and Business Environment” herein for information related to Corporate Conversion.

Structure of BGC Group, Inc. as of June 30, 2024

The following diagram illustrates our organizational structure as of June 30, 2024. The diagram does not reflect the various subsidiaries of BGC Partners, BGC U.S. OpCo, BGC Global OpCo, or Cantor, or the noncontrolling interests in our consolidated subsidiaries. The diagram also does not reflect certain ownership of BGC Group as follows: (a) for purposes of economic percentages, 15.9 million shares of BGC Group Class A restricted common stock as these are not entitled to receive any dividends (however, these shares of BGC Group Class restricted common stock are included for voting power of BGC Group); (b) 7.3 million assumed RSUs; (c) 32.6 million RSUs converted from former partners’ units in BGC Holdings; (d) 30.5 million RSUs issued in relation to employee compensation; (e) 4.8 million contingent shares to be issued to terminated employees per their respective separation agreements; and (f) 0.4 million contingent shares to be issued in exchange for acquisition units.

1 For the purposes of this diagram, Cantor includes Cantor Fitzgerald, L.P. and CFGM. Cantor Fitzgerald, L.P. owns 19.7% of the economics and 63.3% of the voting power in BGC Group. CFGM owns 0.6% of the economics and 2.0% of the voting power in BGC Group.

2 Percentage includes restricted shares issued in exchange for former partners’ units in BGC Holdings.

3 Public Stockholders includes unrestricted shares owned by employees, executives, and directors due to an inability to track such shares once they leave the Company’s transfer agent.

4 BGC Partners is a wholly owned subsidiary of BGC Group and consolidated with other wholly and non wholly-owned subsidiaries.

The diagram reflects the following activity of BGC Class A common stock and BGC Class B common stock from December 31, 2023 through June 30, 2024 as: (a) the restrictions released on 10.9 million shares of BGC Class A common stock; (b) 21.9 million shares of BGC Class A common stock repurchased by us; (c) 5.7 million shares of BGC Class A common stock issued for vested RSUs; (d) 0.5 million shares of BGC Class A common stock issued for contingent shares issued in exchange for acquisition units; (e) 1.1 million shares of BGC Class A common stock issued for contingent shares issued in exchange for former partners’ units in BGC Holdings; (f) 0.7 million shares of BGC Class A restricted common stock forfeited by former partners and employees; and (g) 4.8 million shares of BGC Class A common stock issued for compensation. 0.5 million shares of Class A common stock were issued by us under our acquisition shelf 2019 Form S-4 Registration Statement (Registration No. 333-233761) between December 31, 2023 and June 30, 2024; 17.2 million of such shares remain available for issuance by us under such Registration Statement. Also, an immaterial number of shares of Class A common stock were issued by us under our DRIP Registration Statement (Registration No. 333-173109) between December 31, 2023 and June 30, 2024; 9.2 million of such shares remain available for issuance by us under the DRIP Registration Statement.

Credit Risk

Credit risk arises from potential non-performance by counterparties and customers. BGC has established policies and procedures to manage its exposure to credit risk. BGC maintains a thorough credit approval process to limit exposure to counterparty risk and employs stringent monitoring to control the counterparty risk from its matched principal and agency businesses. BGC’s account opening and counterparty approval process includes verification of key customer identification, anti-money laundering verification checks and a credit review of financial and operating data. The credit review process includes establishing an internal credit rating and any other information deemed necessary to make an informed credit decision, which may include correspondence, due diligence calls and a visit to the entity’s premises, as necessary.

Credit approval is granted subject to certain trading limits and may be subject to additional conditions, such as the receipt of collateral or other credit support. Ongoing credit monitoring procedures include reviewing periodic financial statements and publicly available information on the client and collecting data from credit rating agencies, where available, to assess the ongoing financial condition of the client.

In addition, BGC incurs limited credit risk related to certain brokerage activities. The counterparty risk relates to the collectability of the outstanding brokerage fee receivables. The review process includes monitoring both the clients and the related brokerage receivables. The review includes an evaluation of the ongoing collection process and an aging analysis of the brokerage receivables.

Principal Transaction Risk

Through its subsidiaries, BGC executes matched principal transactions in which it acts as a “middleman” by serving as counterparty to both a buyer and a seller in matching back-to-back trades. These transactions are then settled through a recognized settlement system or third-party clearing organization. Settlement typically occurs within one to three business days after the trade date. Cash settlement of the transaction occurs upon receipt or delivery of the underlying instrument that was traded. BGC generally avoids settlement of principal transactions on a free-of-payment basis or by physical delivery of the underlying instrument. However, free-of-payment transactions may occur on a very limited basis.

The number of matched principal trades BGC executes has continued to grow as compared to prior years. Receivables from broker-dealers, clearing organizations, customers and related broker-dealers and Payables to broker-dealers, clearing organizations, customers and related broker-dealers on the Company’s unaudited Condensed Consolidated Statements of Financial Condition primarily represent the simultaneous purchase and sale of the securities associated with those matched principal transactions that have not settled as of their stated settlement dates. BGC’s experience has been that substantially all of these transactions ultimately settle at the contracted amounts, however, the ability to settle has the potential to be impacted by unforeseen circumstances.

Market Risk

Market risk refers to the risk that a change in the level of one or more market prices, rates, indices or other factors will result in losses for a specified position. BGC may allow certain of its desks to enter into unmatched principal transactions in the ordinary course of business and hold long and short inventory positions. These transactions are primarily for the purpose of facilitating clients’ execution needs, adding liquidity to a market or attracting additional order flow. As a result, BGC may have market risk exposure on these transactions. BGC’s exposure varies based on the size of its overall positions, the risk characteristics of the instruments held and the amount of time the positions are held before they are disposed of. BGC has limited ability to track its exposure to market risk and unmatched positions on an intra-day basis; however, it attempts to mitigate its market risk on these positions by strict risk limits, extremely limited holding periods and hedging its exposure. These positions are intended to be held short term to facilitate customer transactions. However, due to a number of factors, including the nature of the position and access to the market on which it trades, BGC may not be able to unwind the position and it may be forced to hold the position for a longer period than anticipated. All positions held longer than intra-day are marked to market.

We also had Financial instruments owned, at fair value, of $194.0 million as of June 30, 2024. These include investments in equity securities, which are publicly-traded. Investments in equity securities carry a degree of risk, as there can be no assurance that the equity securities will not lose value and, in general, securities markets can be volatile and unpredictable. As a result of these different market risks, our holdings of equity securities could be materially and adversely affected. We may seek to minimize the effect of price changes on a portion of our investments in equity securities through the use of derivative contracts. However, there can be no assurance that our hedging activities will be adequate to protect us against price risks associated with our investments in equity securities. See Note 11—“Derivatives” and Note 12—“Fair Value of Financial Assets and Liabilities” to our unaudited Condensed Consolidated Financial Statements in Part I, Item 1 of this Quarterly Report on Form 10-Q for further information regarding these investments and related hedging activities.

Our risk management procedures and strict limits are designed to monitor and limit the risk of unintended loss and have been effective in the past. However, there is no assurance that these procedures and limits will be effective at limiting unanticipated losses in the future. Adverse movements in the securities positions or a downturn or disruption in the markets for these positions could result in a substantial loss. In addition, principal gains and losses resulting from these positions could on occasion have a disproportionate effect, positive or negative, on BGC’s unaudited Condensed Consolidated Financial Condition and Results of Operations for any particular reporting period.

Operational Risk

Our businesses are highly dependent on our ability to process a large number of transactions across numerous and diverse markets in many currencies on a daily basis. If any of our data processing systems do not operate properly or are disabled or if there are other shortcomings or failures in our internal processes, people or systems, we could suffer impairment to our liquidity, financial loss, a disruption of our businesses, liability to clients, regulatory intervention or reputational damage. These systems may fail to operate properly or become disabled as a result of events that are wholly or partially beyond our control, including cybersecurity incidents or other failures of our or third party information technology systems, a disruption of electrical or communications services or our inability to occupy one or more of our buildings. The inability of our systems to accommodate an increasing volume of transactions could also constrain our ability to expand our businesses.

In addition, despite our contingency plans, our ability to conduct business may be adversely impacted by a disruption in the infrastructure that supports our businesses and the communities in which they are located. This may include a disruption involving electrical, communications, transportation or other services used by us or third parties with whom we conduct business.

Further, our operations rely on the secure processing, storage and transmission of confidential and other information on our computer systems and networks. Although we take protective measures such as software programs, firewalls and similar technology to maintain the confidentiality, integrity and availability of our and our clients’ information, the nature of the threats continue to evolve. As a result, our computer systems, software and networks may be vulnerable to unauthorized access, loss or destruction of data (including confidential client information), account takeovers, unavailability or disruption of service, computer viruses, acts of vandalism, or other malicious code, cyber-attacks and other events that could have an adverse security impact. There have also been an increasing number of malicious cyber incidents in recent years in various industries, including ours. Any such cyber incidents involving our computer systems and networks, or those of third parties important to our businesses, could present risks to our operations.

Foreign Currency Risk

BGC is exposed to risks associated with changes in FX rates. Changes in FX rates create volatility in the U.S. dollar equivalent of the Company’s revenues and expenses. In addition, changes in the remeasurement of BGC’s foreign currency denominated financial assets and liabilities are recorded as part of its results of operations and fluctuate with changes in foreign currency rates. BGC monitors the net exposure in foreign currencies on a daily basis and hedges its exposure as deemed appropriate with highly rated major financial institutions.

The majority of the Company’s foreign currency exposure is related to the U.S. dollar versus the pound sterling and the euro. For the financial assets and liabilities denominated in the pound sterling and euro, including foreign currency hedge positions related to these currencies, we evaluated the effects of a 10% shift in exchange rates between those currencies and the U.S. dollar, holding all other assumptions constant. The analysis used the stress-tested scenario as the U.S. dollar strengthening against both the euro and against the pound sterling. If as of June 30, 2024, the U.S. dollar had strengthened against both the euro and the pound sterling by 10%, the currency movements would have had an aggregate negative impact on our net income of approximately $10.9 million.

Interest Rate Risk

BGC had $1,450.0 million in fixed-rate debt outstanding as of June 30, 2024. These debt obligations are not currently subject to fluctuations in interest rates, although in the event of refinancing or issuance of new debt, such debt could be subject to changes in interest rates. As of June 30, 2024, BGC did not have any borrowings outstanding under its Revolving Credit Agreement. The Revolving Credit Agreement interest rate on borrowings is based on SOFR or a defined base rate plus additional margin. As of June 30, 2024, BGC did not have any borrowings outstanding under its BGC Credit Agreement. Borrowings under the BGC Credit Agreement bear interest at a rate equal to 25 basis points less than the applicable borrower’s borrowing rate under its revolving credit agreement with third party banks, or if FICC-FSD Margin Loans, at a rate equal to the overnight interest rate actually earned by the borrower or its affiliates on borrowings under the applicable FICC-GSD Margin Loan that are posted to clearinghouses or kept available for posting at clearinghouses. To assess exposure to interest rate risk, we evaluated the effect of a 1% increase in interest rates, holding all other assumptions constant. The analysis indicated that our consolidated net earnings for the three and six months ended June 30, 2024, would have declined by $0.5 million and $1.2 million, respectively, if interest rates increased by an additional 1%.

Evaluation of Disclosure Controls and Procedures

The Company maintains disclosure controls and procedures that are designed to ensure that information required to be disclosed by the Company is recorded, processed, accumulated, summarized and communicated to its management, including its Chairman of the Board and Chief Executive Officer and its Chief Financial Officer, to allow timely decisions regarding required disclosures, and reported within the time periods specified in the SEC’s rules and forms. The Chairman of the Board and Chief Executive Officer and the Chief Financial Officer have performed an evaluation of the effectiveness of the design and operation of the Company disclosure controls and procedures as of June 30, 2024. Based on that evaluation, the Chairman of the Board and Chief Executive Officer and the Chief Financial Officer concluded that the Company’s disclosure controls and procedures were effective as of June 30, 2024.

Changes in Internal Control over Financial Reporting

During the three and six months ended June 30, 2024, there were no changes in our internal control over financial reporting that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

There have been no material changes to the risk factors previously disclosed under Part I, Item 1A, “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2023, filed with the SEC on February 29, 2024.