Assets of Businesses Held for Sale & Sales of Businesses

9 Months Ended

Sep. 30, 2016

Discontinued Operations and Disposal Groups [Abstract]

Assets of Businesses Held for Sale & Sales of Businesses

Assets of Businesses Held for Sale & Sales of Businesses

In March 2015, the Company completed the sale of KCG Hotspot to Bats. The Company and Bats have agreed to share certain tax benefits, which could result in future payments to the Company of up to approximately $70.0 million in the three-year period following the close, consisting of a $50.0 million payment in 2018 and annual payments of up to $6.6 million per year (the "Annual Payments"), from 2016 up to and including 2018. The Annual Payments were contingent on KCG Hotspot achieving various levels of trading volumes through June 2015. That contingency has been removed because the trading levels were achieved. However, the remaining Annual Payments are contingent on Bats generating sufficient taxable net income to receive the tax benefits.

The Company has elected the fair value option related to the receivable from Bats and considers the receivable to be a Level 2 asset in the fair value hierarchy as the fair value is derived from observable significant inputs such as contractual cash flows and market discount rates. KCG received the first annual payment of $6.6 million in March 2016. The remaining additional potential payments of $63.2 million are recorded at a fair value of $59.9 million in Other assets on the Consolidated Statement of Financial Condition as of September 30, 2016.

The Company recorded a gain upon completion of the sale of $385.0 million, which is recorded as Investment income and other, net on the Consolidated Statement of Operations for the nine months ended September 30, 2015. The net gain on the sale of KCG Hotspot was $373.8 million which is net of direct costs associated with the sale which comprised professional fees of $6.7 million and compensation of $4.5 million, which are recorded in Professional fees and Employee compensation and benefits, respectively, on the Consolidated Statement of Operations for the nine months ended September 30, 2015.

In accordance with the Company's strategic review of its businesses and evaluation of their potential value in the marketplace relative to their current and expected returns, KCG determined in 2015 that certain of its businesses including its DMM business, were no longer considered core to its strategy. KCG believes that the sale or divestiture of these businesses does not represent a strategic shift that will have a major effect on its operations and financial results, however, these businesses met the requirements to be considered as held for sale at December 31, 2015 and, for the assets of businesses not yet sold, continue to meet such requirements at September 30, 2016. Assets of businesses held for sale are recorded at the lower of their book value or their estimated fair value and are reported as Assets of businesses held for sale on the September 30, 2016 and December 31, 2015 Consolidated Statements of Financial Condition. See Footnote 9 "Goodwill and Intangible Assets" for further details.

Included in the $26.0 million of Assets of businesses held for sale at December 31, 2015 were assets related to the Company's retail options market making business. The assets were sold to a third party in March 2016, and as a result of the sale, the Company recorded a gain of $2.9 million, which is included in Investment income and other, net on the Consolidated Statement of Operations for the nine months ended September 30, 2016. Also included in the $26.0 million of Assets of businesses held for sale at December 31, 2015 were assets related to the Company's DMM business. The DMM business was sold to Citadel in May 2016. As charges were recorded in the fourth quarter of 2015 in order to reflect the estimated fair value of this held for sale business, no gain or loss on sale was recorded in the nine months ended September 30, 2016. The Company continues to have one business that is considered to be held for sale at September 30, 2016.

The assets of businesses held for sale as of September 30, 2016 and December 31, 2015 are summarized as follows (in thousands):

	September 30, 2016		December 31, 2015
Assets:
Intangible assets, net of accumulated amortization	$	8,194	$	25,999
Total assets of businesses held for sale	$	8,194	$	25,999