Assets of Business Held for Sale & Sales of Businesses

3 Months Ended

Mar. 31, 2017

Discontinued Operations and Disposal Groups [Abstract]

Assets of Business Held for Sale & Sales of Businesses

Assets of Business Held for Sale & Sales of Businesses

In March 2015, the Company sold its spot institutional foreign exchange ECN, KCG Hotspot, to Bats Global Markets, Inc. ("Bats"). As part of the sale, 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. On March 1, 2017, Bats merged with CBOE Holdings, Inc. (“CBOE”) (the “Bats Merger”). The remaining Annual Payments are contingent on CBOE 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 and second Annual Payments of $6.6 million and $6.5 million in March 2016 and 2017, respectively. The remaining additional potential payments of $56.8 million are recorded at a fair value of $54.1 million in Other assets on the Consolidated Statement of Financial Condition as of March 31, 2017.

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 and retail options market making businesses, were no longer considered core to its strategy.

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 business held for sale on the Consolidated Statements of Financial Condition. Included in the $8.2 million of Assets of business held for sale at December 31, 2016 were assets related to a technology platform. At March 31, 2017, the Company determined that this business was no longer held for sale and as a result, reclassified the assets back to intangible assets on the Consolidated Statements of Financial Condition. The Company does not have any businesses that are considered to be held for sale at March 31, 2017. See Footnote 9 "Goodwill and Intangible Assets" for further details.

Assets related to the Company's retail options market making business, which were sold to a third party in March 2016 resulted in a gain of $2.9 million, which is included in Investment income and other, net on the Consolidated Statement of Operations for the three months ended March 31, 2016. The DMM business was sold to Citadel in May 2016. As charges were recorded in the fourth quarter of 2015 to reflect the estimated fair value of this held for sale business, no gain or loss on sale was recorded in 2016.

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

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