Business Segments

12 Months Ended

Dec. 31, 2016

Segment Reporting [Abstract]

Business Segments

Business Segments

As of December 31, 2016, the Company's operating segments comprised the following: (i) Market Making; (ii) Global Execution Services; and (iii) Corporate and Other.

The Market Making segment principally consists of market making in the cash, futures and options markets across global equities, options, fixed income, currencies and commodities. As a market maker, the Company commits capital on a principal basis by offering to buy securities from, or sell securities to, broker dealers, banks and institutions. The Company engages in principal trading in the Market Making segment direct to clients as well as in a supplemental capacity on exchanges, ECNs and ATSs. The Company is an active participant on all major global equity and futures exchanges and also trades on substantially all domestic electronic options exchanges. As a complement to electronic market making, the cash trading business handles specialized orders and also transacts on the OTC Bulletin Board marketplaces operated by the OTC Markets Group Inc. and the AIM.

Results for the Company's former retail U.S. options market making business and DMM business are included in Market Making segment up to the date of its sale in 2016.

The Global Execution Services segment comprises agency-based trading and trading venues, offering execution services in global equities, options, futures and fixed income on behalf of institutions, banks and broker dealers. The Company earns commissions as an agent on behalf of clients as well as between principals to transactions; in addition, the Company will commit capital on behalf of clients as needed. Agency-based, execution-only trading in the segment is done primarily through a variety of access points including: (i) algorithmic trading and order routing in global equities and options; (ii) institutional sales traders executing program, block and riskless principal trades in global equities and ETFs; (iii) a fixed income ECN that also offers trading applications; and (iv) an ATS for U.S. equities.

In September 2016, the Company completed the acquisition of Neonet. Neonet is an independent agency broker and execution specialist based in Stockholm, Sweden. The results of Neonet, beginning on the date of acquisition, are included in this segment.

Results for the Company's former FCM business and KCG Hotspot are included in the Global Execution Services segment up to the date of their respective sales.

The Corporate and Other segment contains the Company's investments, principally in strategic trading-related opportunities; manages the deployment of capital across the organization; houses executive management functions; and maintains corporate overhead expenses and all other income and expenses that are not attributable to our other segments. The Corporate and Other segment also contains functions that support the Company’s other segments such as self-clearing services, including stock lending activities.

The Company’s revenues, income (loss) before income taxes from continuing operations (“Pre-tax earnings”) and total assets by segment are summarized in the following table (in thousands):

	Market Making		Global Execution Services		Corporate and Other			Consolidated Total
For the year ended December 31, 2016:
Revenues	$	775,173	$	283,756	$	395,483		$	1,454,412
Pre-tax earnings	93,732		12,008		290,688			396,428
Total assets	5,400,530		703,426		157,331			6,261,287
For the year ended December 31, 2015:
Revenues	$	884,858	$	667,723	$	46,529		$	1,599,110
Pre-tax earnings	124,028		368,957		(113,023		)	379,962
Total assets	4,855,482		727,029		458,024			6,040,535
For the year ended December 31, 2014:
Revenues	$	901,152	$	345,710	$	69,369		$	1,316,232
Pre-tax earnings	146,713		11,056		(72,582		)	85,187
Total assets	4,401,021		786,734		1,633,620			6,821,375

Included in Revenues and Pre-tax earnings within Corporate and Other for the year ended December 31, 2016 is a $364.4 million gain from the sales of substantially all of the Company's investment in Bats. Included in Revenues and Pre-tax earnings within Global Execution Services for the year ended December 31, 2015 is a gain related to the sale of KCG Hotspot of $385.0 million and $373.8 million, respectively.

Included in total assets within Corporate and Other at December 31, 2016 is $8.2 million related to Assets of businesses held for sale. See Footnote 3 "Assets of Businesses Held for Sale & Sales of Businesses" for further information.

In the first quarter of 2015, the Company began to allocate costs incurred to operate its self-clearing function to the Market Making and Global Execution Services segments and no longer report it as a distinct business within the Corporate and Other segment. Previously, these support costs were embedded within the internal clearing rates charged by the Corporate and Other segment to the various businesses, which eliminated during consolidation.

Additionally, prior to 2015, funding costs of inventory positions were recorded in the Corporate and Other segment, primarily within Collateralized financing interest on the Consolidated Statements of Operations. These costs were subsequently charged out to the Market Making and Global Execution Services segments primarily through the Interest, net line item, with an equal and offsetting revenue item within the Corporate and Other segment. With the move of the self clearing team to a support function, these third party costs are now charged directly to the businesses within the Market Making and Global Execution Services segments. This shift in how the Company’s self clearing unit is reported has no impact to the Consolidated Statements of Operations, nor any of the individual line items within it. However, on a segment level, this decreases the amount of total revenues reported by the Corporate and Other segment, because it no longer records the offsetting revenue for these third party funding costs. This change in the measurement of segment profitability, which has no impact to the consolidated results, is reported prospectively, and, therefore, is not reflected in the financial results for any period prior to January 1, 2015.

Included in total assets at December 31, 2015 is $26.0 million related to Assets of businesses held for sale. As noted in Footnote 3 "Discontinued Operations, Assets Held for Sale & Sales of businesses", such assets are included as Assets held for sale at December 31, 2016 and 2015.

The Company operates in the U.S. and internationally, primarily in Europe and Asia. The following table presents Revenues by geographic area.

	U.S.		International		Consolidated Total
For the year ended December 31, 2016:
Revenues	$	1,351,242	$	103,170	$	1,454,412
For the year ended December 31, 2015:
Revenues	$	1,449,370	$	149,740	$	1,599,110
For the year ended December 31, 2014:
Revenues	$	1,127,088	$	189,144	$	1,316,232