Formation of Derivatives Venture

9 Months Ended

Sep. 30, 2017

Formation of Derivatives Venture

Formation of Derivatives Venture

(3) Formation of Derivatives Venture

In September 2017, the Company signed a definitive agreement with Option Technology Solutions LLC (“OpTech”) to form Matrix Holdings Group (“Matrix”), a newly established derivatives execution and technology business focused on sell-side clients, professional traders and select hedge funds. The venture is expected to launch by the first quarter of 2018, subject to receipt of required regulatory approvals and satisfaction of other customary closing conditions.

The Company will contribute the ITG Derivatives entity, including its broker-dealer license and professional trader client base with revenues of $3.8 million during the nine months ended September 30, 2017, along with certain derivatives-focused software and technology for an initial minority stake of approximately 20%. OpTech will contribute the management team, a retail-focused trading and analytics platform and capital.

During the three months ended September 30, 2017, the Company deemed the remaining value of a customer intangible asset recorded in ITG Derivatives of $0.3 million fully impaired and incurred legal fees related to the establishment of the Matrix venture of $0.8 million.

Upon closing, the Company will reflect the carrying value of the net assets contributed to the Matrix venture, currently estimated at approximately $2 million, as an investment in minority interest and will account for its share of results under the equity method. 

The Company determined that the pending contribution of ITG Derivatives does not meet the requirements to be treated as a discontinued operation. As such, the results of ITG Derivatives through the closing date of the venture will be included in continued operations on the Condensed Consolidated Statement of Operations in the U.S. Operations segment.