Related Parties

The Company interacts with Jefferies, who is the beneficial owner of more than 10 percent of the outstanding KCG Class A Common Stock. The Company also has trading and other activities with certain investees for which it accounts for under the equity method of accounting or accounted for under the equity method at any time during the relevant accounting period, including Bats. Each is considered a related party for the applicable periods. See Footnote 9 "Investments" for the carrying value of these investees at December 31, 2016 and December 31, 2015 and for the Company's income with respect to its equity earnings from these investees for the years ended December 31, 2016, 2015 and 2014.

The Company earns revenues, incurs expenses and maintains balances with these related parties or their affiliates in the ordinary course of business. As of the date and period indicated below, the Company had the following balances and transactions with its related parties or their affiliates (in thousands):



	For the years ended December 31,
Statements of Operations	2016		2015			2014
Revenues
Commissions and fees	$	31,716	$	15,844		$	14,528
Trading revenues, net	1,839		6,468			3,862
Interest, net	581		914			651
Total revenues from related parties	$	34,136	$	23,226		$	19,041
Expenses
Execution and clearance fees⁽¹⁾	$	12,464	$	(15,472	)	$	(10,261	)
Communications and data processing	18,613		6,351			—
Payment for order flow	5		2,685			585
Collateralized financing interest	237		399			529
Professional fees	—		5,507			—
Other expense	231		2,349			1,719
Total expenses incurred with respect to related parties	$	31,550	$	1,819		$	(7,428	)

⁽¹⁾

Represents net volume based fees paid or received by KCG for taking or providing liquidity to related trading venues. Volume based fees will vary period to period based on usage. The volume with the Company's related party are part of its overall trading strategies, and in 2016, net volume based fees with such party resulted in more taking of liquidity as compared to 2015, when the Company provided more liquidity to such party.



Statements of Financial Condition	December 31, 2016		December 31, 2015
Assets
Securities borrowed	$	5,293	$	10,573
Receivable from brokers, dealers and clearing organizations	2,106		1,987
Other assets	62,906		67,652
Liabilities
Securities loaned	$	2,594	$	3,844
Payable to brokers, dealers and clearing organizations	188		61
Accrued expenses and other liabilities	3,708		4,159

As noted in Footnote 9 "Investments", in 2016, the Company sold substantially all of its investment in Bats, which it accounted for under the equity method. The Company recorded a pre-tax gain of $364.4 million from the sales, which is included in Investment income and other, net on the Consolidated Statements of Operations for the year ended December 31, 2016 and is not included in the table above. As a result of the sales, Bats is no longer accounted for under the equity method. Beginning in 2017, Bats will no longer be considered a related party.

In March 2015, the Company completed the sale of KCG Hotspot to Bats, a related party. The Company recorded a gain on sale of $385.0 million which is included as Investment income and other, net on the Consolidated Statements of Operations for the year ended December 31, 2015. 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. KCG received the first annual payment of $6.6 million in March 2016. The remaining additional potential payments are recorded at their estimated fair value of $60.5 million in Other assets on the December 31, 2016 Consolidated Statement of Financial Condition and in the table above. See Footnote 3 "Discontinued Operations, Assets of Businesses Held for Sale & Sales of Businesses" for additional information.

As part of the Company’s "modified Dutch auction" tender offer ("Tender Offer") in 2015, it accepted for purchase validly tendered shares of the KCG Class A Common Stock at $14.00 per share from the following directors and stockholders, or their affiliates, who owned more than 10% of KCG Class A Common Stock (in thousands, at the time of the Tender Offer):



Name	Relationship/ Title	Number of Shares Purchased	Total Purchase Price
Stephen Schuler and related entities⁽¹⁾	Stockholder/ Former Director	1,708	$	23,918
Daniel Tierney and related entities⁽²⁾	Stockholder/Former Director	1,798	25,176
General Atlantic⁽³⁾	Former Stockholder	8,285	115,989
Jefferies	Stockholder	6,533	91,458

⁽¹⁾

Includes (i) Stephen Schuler, (ii) Serenity Investments, LLC, a limited liability company organized under the laws of the state of Alaska (“Serenity”), of which Mr. Schuler and his wife separately hold equity interests that together represent a controlling interest and with respect to which Mr. Schuler may be deemed to share voting and dispositive power and (iii) the Schuler Family GST Trust (the "Schuler Family Trust") dated June 6, 2003, a trust that holds securities with respect to which Mr. Schuler may be deemed to share voting and dispositive power. Mr. Schuler disclaims beneficial ownership of the securities held by Serenity except to the extent of his pecuniary interest therein. In May 2016, Stephen Schuler resigned from his position as a director of the Company. Serenity and the Schuler Family Trust no longer hold shares of KCG Class A Common Stock.

⁽²⁾

Includes (i) Daniel Tierney and (ii) the Daniel V. Tierney 2011 Trust (the “Tierney Trust”), a trust of which Daniel Tierney is the settlor and beneficiary. Mr. Tierney does not have or share voting or dispositive power over the securities held by the Tierney Trust, but does have the power to revoke the Tierney Trust and acquire beneficial ownership of such securities within 60 days. Mr. Tierney disclaims beneficial ownership of the securities held by the Tierney Trust. In November, 2015, Daniel Tierney resigned from his position as a director of the Company. The Tierney Trust no longer holds shares of KCG Class A Common Stock.

⁽³⁾

General Atlantic appointed two directors to the Company’s board of directors (Rene Kern, an employee of General Atlantic and John C. (Hans) Morris, a former employee of General Atlantic). Neither director participated in the Tender Offer with respect to shares they hold directly. Following the completion of the Swap Transaction, General Atlantic no longer holds shares of KCG Class A Common Stock.

The purchases from the individuals and entities listed above were on the same terms that were available to all of the Company’s stockholders.

In the third quarter of 2015, the Company contributed microwave communication network assets to a JV, which is considered a related party. These assets were contributed at fair value and resulted in the Company recording a $4.3 million writedown of such assets. This charge is included in Writedown of assets and other real estate related charges on the Consolidated Statements of Operations for the year ended December 31, 2015.

On November 4, 2015, the Company purchased approximately 1.9 million shares of KCG Class A Common Stock from Serenity for $24.5 million or $12.89 per share, the closing stock price of the KCG Class A Common Stock on that date. Stephen Schuler, a former director of the Company, and his wife separately hold equity interests that together represent a controlling interest in Serenity.

On November 11, 2015, the Company purchased approximately 2.0 million KCG Warrants from Daniel Tierney for $3.6 million.

On December 29, 2015, Aperture, at the time, a related party, redeemed all the Company’s interests in Aperture through a series of transactions, for an aggregate purchase price of $28.5 million. The Company recognized a gain of $10.5 million on the sale.

For the year ended December 31, 2015, the Company paid Jefferies $16.8 million in fees related to financing and advisory activities associated with the issuance of the 6.875% Senior Secured Notes and the sale of KCG Hotspot to Bats. The $16.8 million comprised $11.3 million that was capitalized as debt issuance costs and its remaining balance is included, net, within Debt on the Consolidated Statements of Financial Condition and $5.5 million that was recorded as Professional fees in the Consolidated Statement of Operations for the year ended December 31, 2015. These Professional fees are included in the table above, however, the $11.3 million capitalized debt issuance costs are not included in the table above as such costs are being amortized over the life of the debt.

In the years ended December 31, 2016 and 2015, the Company paid $72,000 and $31,000, respectively, in fees to Jefferies for acting as broker in connection with the Company's stock buyback program. Such fees are recorded within Treasury stock, at cost in the Consolidated Statements of Financial Condition at both December 31, 2016 and December 31, 2015 and are not included in the above table. In 2016, the Company also paid an additional $41,000, in fees, to Jefferies for acting as broker in connection to the open market sales of the Company's shares of Bats common stock.

During the second quarter of 2016, the Company repurchased 1.9 million shares of KCG Class A Common Stock for $26.1 million, for an average price per share of $13.48, and 6.6 million Warrants for $14.2 million from entities affiliated with two former directors of KCG.

In November 2016, the Company entered into a purchase agreement with General Atlantic, a related party. Pursuant to the terms of the purchase agreement, the Company sold 8.9 million shares of common stock of Bats to General Atlantic in exchange for all of General Atlantic’s 18.7 million shares of KCG Class A Common Stock and 8.1 million Warrants. See Footnote 9 "Investments" for further details regarding the Swap Transaction. Following the completion of the Swap Transaction, General Atlantic is no longer considered a related party. Additionally, the Company paid Jefferies, a related party, $2.9 million for acting as broker and for advisory activities associated with the Swap Transaction, half of which was payable by the Company and half of which was payable on behalf of General Atlantic. The settlement of the portion paid by the Company on behalf of General Atlantic was completed by the Company retaining shares of Bats common stock with a fair value at the time of the Swap Transaction equal to the amount payable by General Atlantic to Jefferies, or approximately 46,000 shares. Jefferies was also the counterparty in the block sale, which the Company entered into in connection with the Swap Transaction. See Footnote 9 "Investments" for additional information on the Swap Transaction and the block sale.

See Footnote 17 "Tender Offer and Warrants and Stock Repurchase" for additional information on the Tender Offer and stock repurchases.