Geographic Information and Business Segments

9 Months Ended

Sep. 30, 2017

Geographic Information and Business Segments

Geographic Information and Business Segments

17. Geographic Information and Business Segments

The Company operates its business in the U.S. and internationally, primarily in Europe and Asia. Significant transactions and balances between geographic regions occur primarily as a result of certain Company’s subsidiaries incurring operating expenses such as employee compensation, communications and data processing and other overhead costs, for the purpose of providing execution, clearing and other support services to affiliates. Charges for transactions between regions are designed to approximate full costs. Intra-region income and expenses and related balances have been eliminated in the geographic information presented below to accurately reflect the external business conducted in each geographical region. The revenues are attributed to countries based on the locations of the subsidiaries. The following table presents total revenues by geographic area for the three and nine months ended September 30, 2017 and 2016:

	For the Three Months Ended				For the Nine Months Ended
	September 30,				September 30,
(in thousands)	2017		2016		2017		2016
Revenues:
United States	$	218,042	$	109,324	$	399,361	$	341,458
Ireland		17,874		31,936		79,129		112,481
United Kingdom		10,485		—		10,485		—
Sweden		2,118		—		2,118		—
Singapore		22,601		23,505		72,210		77,363
India		178		—		178		—
Australia		(2)		1		1		7
China		(10)		40		(21)		316
Total revenues	$	271,286	$	164,806	$	563,461	$	531,625

Prior to the Acquisition, the Company was managed and operated as one business, and, accordingly, operated under one reportable segment.  As a result of the acquisition of KCG, beginning in the third quarter of 2017 the Company has three operating segments: (i) Market Making; (ii)  Execution Services; and (iii) Corporate.

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, electronic communications networks (“ECNs”) and alternative trading systems (“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 Alternative Investment Market of the London Stock Exchange ("AIM"). 

The 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 as well as technology services revenues. The Company earns commissions and commission equivalents 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 exchange traded funds ("ETFs"); (iii) a fixed income ECN that also offers trading applications; and (iv) an ATS for U.S. equities.Technology licensing fees are earned from third parties for licensing of the Company’s proprietary risk management and trading infrastructure technology and the provision of associated management and hosting services.

The Corporate segment contains the Company's investments, principally in strategic trading-related opportunities and maintains corporate overhead expenses and all other income and expenses that are not attributable to the Company's other segments. 

Management evaluates the performance of its segments on a pre-tax basis. Segment assets and liabilities are not used for evaluating segment performance or in deciding how to allocate resources to segments. The Company’s total revenues and income (loss) before income taxes and noncontrolling interest (“Pre-tax earnings”) by segment are summarized in the following table:

		Market		Execution		Corporate		Consolidated
(in thousands)		Making		Services		(1)		Total
For the three months ended September 30, 2017:
Total revenue	$	228,582	$	39,077	$	3,627	$	271,286
Income (loss) before income taxes and noncontrolling interest		(19,322)		(6,017)		(21,156)		(46,495)
For the three months ended September 30, 2016:
Total revenue	$	161,977	$	2,931	$	(102)	$	164,806
Income (loss) before income taxes and noncontrolling interest		36,888		1,608		(622)		37,874
(1)  Amounts shown in the Corporate segment include eliminations of income statement and balance sheet items included in the Company's other segments.
For the nine months ended September 30, 2017:
Total revenue	$	514,823	$	44,964	$	3,674	$	563,461
Income (loss) before income taxes and noncontrolling interest		17,241		(4,913)		(29,749)		(17,421)
For the nine months ended September 30, 2016:
Total revenue	$	524,503	$	7,224	$	(102)	$	531,625
Income (loss) before income taxes and noncontrolling interest		138,572		3,196		(778)		140,990