Welcome to the BGC Partners' Second Quarter 2021 Earnings conference call. At this time, all participants will be in a listen-only mode. After the speaker presentation, there will be a Question-and-Answer session. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Jason Chryssicas, Head of Investor Relations. Thank you, and please go ahead.

Good morning, everyone. Today, we issued BGC's second quarter 2021 financial results press release and the presentation. You can find these at ir.bgcpartners.com. Please note, you can find additional details on our quarterly results in today's press release and the investor presentation. Unless otherwise stated, the results provided on today's call compare only the second quarter of 2021 with the year-earlier period. We will be referring to our results on this call only on an adjusted earnings basis unless otherwise stated. We may also refer to adjusted EBITDA as well as liquidity, which we define as cash and cash equivalents plus marketable securities that have not been financed, reverse repurchase agreements and securities owned, less securities loaned and repurchase agreements. We define total capital as redeemable partnership interest, total stockholder's equity and non-controlling interest in subsidiaries. Please see today's Press Release for results under GAAP. Please also see the relevant sections, in the back of today's Press Release, for the complete and updated definitions of any non-GAAP terms, reconciliations of these items to the corresponding GAAP results, and how, when, and why management uses such terms. Additional information with respect to our GAAP and non-GAAP results mentioned on today's call is available on our Web site at ir.bgcpartners.com and in our Investor Presentation. We refer to the company's technology-driven businesses as Fenics. Fenics offerings include Fenics Markets, Fenics Growth Platforms, Fenics Integrated, and market data, software and solutions, and post-trade services. Businesses are categorized as Fenics Integrated if they utilize efficient levels of technology, such that amounts of their transactions can be or are executed without broker intervention and have expected pre-tax adjusted earnings margins of at least 25%. I also remind you that the information regarding our businesses on today's call that are not historical are forward-looking statements. These include statements about the effects of COVID-19 pandemic on results, financial position, liquidity, and outlook. Any forward-looking statements involve risks and uncertainties, and except as required by law, BGC undertakes no obligation to update any forward-looking statements. Any outlook and targets discussed on this call assume no material acquisitions, extraordinary transactions, or meaningful changes to the company's stock price. For a discussion of additional risks and uncertainties, which could cause the actual results to differ from those contained in the forward-looking statements, see BGC's SEC filings including, but not limited to, the Risk Factors and special note on forward-looking information set forth in these filings and any updates to these disclosures contained in the subsequent reports on Form 10-K, Form 10-Question, or Form 8-K. With that, I'm now happy to turn the call over to Howard Lutnick, Chairman and CEO of BGC Partners.

Thank you, Jason. Good morning and thank you for joining us for our second quarter 2021 conference call. Joining me for today's call are BGC's Chief Financial Officer, Steve Bisgay, and our Chief Operating Officer, Sean Windeatt. Our profitability improved across all adjusted metrics during the quarter, primarily driven by Fenics, which had net revenue growth of 23.5%. This industry-leading growth reflected strong improvements in rates, FX, and our Fenics Growth Platforms. We executed a number of our objectives in the second quarter, including entering into an agreement to sell our insurance brokerage business for $500 million in cash units during the second quarter, while also repurchasing an additional 10 million shares so far in the third quarter. Additionally, I'm happy to report that, yesterday, BGC's Board of Directors increased our share in unit repurchase authorization to $400 million. Fenics revenue growth was underpinned by strong performance across both Fenics Markets and Growth Platforms, which improved 21% and over 48%, respectively, as compared to last year. Fenics represented over 21% of BGC's total financial services revenue, its highest ever contribution. We expect Fenics to continue to outpace our overall business and peer electronic trading platforms. With the accelerating conversion of our $1.4 billion voice/hybrid business and continued tech innovation, we expect to further expand across the fintech marketplace. With that, I'd like to turn the call over to Steve.

Thank you, Howard, and hello, everyone. As reported in today's earnings release, BGC recorded total revenue of $512.5 million, 1.3% lower than a year ago. This performance reflected improved trading activity in May and June, following softer industry-wide trading volumes in April, where BGC's financial services revenue was 10.7% lower versus the year-ago period. By geography, we saw Europe, Middle East, and Africa revenue decline by 1.3%. The Americas were down by 2.3%, while Asia-Pacific revenues increased by 0.9%. By asset class, rates, energy and commodities, and insurance increased by 2.6%, 4.8%, and 18.6%, respectively. While FX and equity derivatives and cash equities were down by 2.1% and 1.5% respectively. Additionally, credit decreased by 24.3%, reflecting significantly lower industry-wide credit trading activity. Beginning last year, we selectively reduced front office headcount with a focus on underperforming or less profitable brokers. As a result, front office headcount was 8% lower this quarter versus a year ago. While this lowered revenue in the short-term, it was partially offset by a 6% improvement in average productivity, which drove profitability higher. As we continue to automate more of our overall business, both profitability and productivity are expected to increase. Moving on to Fenics, this quarter, Fenics generated net revenue of $97 million, an improvement of 23.5%. Fenics Markets recorded revenue of $86.4 million, an increase of 21%, and had a pre-tax adjusted earnings margin of 29.9% in the second quarter. Fenics Growth Platforms generated revenue of $10.6 million, an improvement of 48.4%. Insurance Brokerage had revenue of $54.3 million, growing by 18.6%, and generated its third quarter of its small quarterly profit. Excluding the results of our insurance brokerage business, BGC's overall pre-tax margin would have been two points higher in the second quarter. Now moving on to expenses, our compensation and employee benefits…

Thank you, Steve, and good day, everyone. Our Fenics businesses generated strong net revenue growth of 23.5%, and represented over 21% of our total financial services revenue. Looking at Fenics in more detail, Fenics market's revenue improved by 21%, driven by strong growth across rates, FX, and market data partially offset by lower industry-wide credit trading activity. Fenics mid effects, which is the leading wholesale FX hedging platform, grew its revenue by approximately 25% versus last year. Building on the platform's longstanding success in spot FX, we launched Asian Non-Deliverable Forwards or NDFs at the beginning of 2021, which has continued to gain traction throughout the year. Fenics direct our web delivered FX option platform had a record quarter and more than doubled its volumes and revenues. Fenics market data signed a record number of new contracts during the quarter with total contracted value increasing by nearly 150% compared to last year. Capitalab's NDF Match business, our advanced web-based matching platform that helps clients reduce foreign exchange exposure generated record revenue during the quarter. Since its launch in 2017, NDF Match has grown its market share, and has become a leading solution for post-trade risk reduction. Looking at our Fenics growth platforms, revenue improved 48.4% from a year ago as these newer standalone platforms to scale onboard new clients and capture market share. Fenics U.S. Treasury average daily volumes grew by over 71% this quarter, significantly eight pace in the overall industry. Fenics U.S. Treasury Club Market share increased from 10% a year ago to over 17% in the second quarter, another quarterly record. In the second quarter, nearly 65% of all Fenics U.S. Treasury trades were transacted at prices, only offered on the platform as it continued to offer the tightest pricing in the market. Additionally, Fenics UST will…

Thank you, Sean. During the second quarter, we executed on a number of our previously stated objectives. We delivered value to our shareholders by entering into an agreement to sell our insurance brokerage business. As of yesterday, we have repurchased or redeemed 31 million shares and units since that sales announcement. All while continuing to grow our Fenics business at a market leading pace. We are excited about our growth prospects and remain highly confident in our finance business. We have built a world-class competitor to the CME and cash U.S. Treasuries and we recently added USP bills along with plants to launch U.S. Repos this month. We continue to build our futures infrastructure to prepare to enter the U.S. rates future business next year. Our sizable voice hybrid revenue base needs us uniquely positioned to convert significant amounts of our revenues to higher margin technology-driven Fenics revenues and capitalize on accelerating electronic trading trends. With that, Operator, we'd like to open the call for questions.

We will now begin the question-and-answer session. [Operator Instructions] Our first question will come from Rich Repetto with Piper Sandler. Please go ahead.

Yes, good morning, Howard, and Steve, and Sean. I guess the question I have is first on the update you just gave on the expression of value of Fenics [indiscernible] I guess did you say interest rate futures or in interest rate product, could you just give us more detail? I didn't catch all the statements that you made about it, Howard?

Sure. So, we are building our futures infrastructure, and looking forward to the expectations of launching U.S. interest rate futures next year. Q – Rich Repetto: And could you elaborate, like for example, who else -- when you launch it, will you have a consortium -- would you likely have a consortium to support it, and who would be the clearing house that would clear the product?

Yes. So, I guess, the macro answer is to stay-tuned, but your instincts are correct, which is that our expectation is we would like to have a clearer, we already has margin in the business. So, there are three firms, there are three institutions that have margin. There is the CME. Obviously they're not going to do it with us. There is FICC, and there's the LCH. And we would like to do business with those counterparties at central clearest to across margining and one type clearing to those who trade on our rates platform. Secondarily, we work -- you know, we have been talking to our customers and clients, and we think we've gotten a great reception, and are very excited about the opportunity to create a competitor to the Chicago Mercantile Exchange's monopoly, and rates futures. And so, I think we will have broad support from those players in what form and exactly how, I look forward to updating you next quarter. Q – Rich Repetto: Okay. So, plans -- even though wouldn't watch until next year, you might have plans -- the structure of it outlined as far as who's involved, outlined sooner, much sooner?

My objective, again, I don't control all things, but the objective of myself and my company is to have an update for you with some level of precision next quarter on this call. Q – Rich Repetto: Great, great. Okay. I'll stay-tuned as you put it, Howard. Next question is for Steve, on the fees -- well, on the interest and dividends, they went up substantially quarter-to-quarter, and I'm just trying to see -- you might've mentioned this in prepared remarks, I might have missed, but I think I know, but can you just tell us what the increase was driven by?

Yes. You're talking about specifically in line, which is the combination of fees from the parties and interest dividends. It specifically relates -- the real change is embedded within that quarter-over-quarter is driven by dividend income from a specific investments. That's what's driving that.

And what would that be -- by any chance of NASDAQ private market sale or…

I'm not in a position to answer to that answer the question.

Pretty good guesser I think. Anyway, lastly on the buyback, what I thought that the buyback, the level that you had this quarter was only for one month, if I understood it right from when you talk about the proceeds from the insurance sale. Is that way it should be interpreted…

That's correct. The buyback is heavily weighted towards the end of the quarter. I'm sorry. Go ahead.

So last quarter, obviously we didn't start buyback shares until after we announced the insurance salvage was at the end of May. And so, we did buyback 21 million shares, but right at the end of the quarter. And then in July, we had purchased 10 million Class A shares in the month of July. And let's see what happens in August and September.

So if you were to get proceeds from besides insurance, well, let me just ask quickly NASDAQ private markets. I'm just trying to understand, would that sale generate more cash proceeds that could be potentially used in a share purchase?

I don't think we have another event that is producing cash to do a share repurchase other than the fact that as you recall, companies currently paying in $0.01 dividend and is a strong cash flow generator. So, I think our ability to buyback share is going forward is strengthened both by our insurance sale and the cash flow generation on the continent.

Okay. And now I think I remember the NASDAQ stock, that's not with BGCP. Hey, listen any additional that would go to the real estate company, right based upon…

That's right. You'd like to hear -- if you'd like to hear all about the NASDAQ and fashion, you have to tuning to new market earnings on Friday.

Understood, understood. Okay. That's all I have. Thank you.

[Operator Instructions] Our next question will come from Patrick O'Shaughnessy with Raymond James. Please go ahead.

Hey, good morning. In the credit space, Tradeweb seems to be having a lot of success with its dealer suites solution. You guys today mentioned Fenics portfolio match. Is that essentially a competitive response to dealer suites?

Yes.

Okay. And how would you differentiate relative to dealers?

Come on, Patrick, you've never heard me answer so short. It is in the same genre as a dealer suites and it is a broad based and we have connectivity to a broad range of market participants. But it is intellectual in the same genre, obviously with a multiple nuance difference, because we built it more recently and therefore, I think it has much more nuance. It's much more effective for the client, but in the same genre associated.

Okay. Appreciate that. Any update on your plans to do full segment reporting, breaking out Fenics from the rest of the business?

I guess the simple answer is no update on that. I do -- I did say before when I was answering the prior question that we do expect to have a more detailed conversation with respect to our futures business and who will participate with us and exactly how we plan to be clearing that and all of those pieces next quarter. So I think that will go a long way towards defining our first step in that process.

Okay. And then speaking of longer duration processes, any update on the potential conversion away from the partnership structure or is that still kind of where it's been?

The prepared remarks that Steve gave were to show you that they are the Board and its advisors are harder to work, trying to execute on that and to be in a position to make the decision to whether they'd like to go forward, but they're hard and work on it. They're examining it. And moving forward, it is something we want to get consider and we're getting in a position to be able to make such a decision hopefully by the end of the year.

Got it. Appreciate that. Steve, balance sheet question for you, there was a relatively large drop in your segregated cash quarter-over-quarter. Is that just a function of moving the insurance brokerage assets into best helper sale?

Entirely, entirely that.

Okay, appreciate that. In your GAAP to non-GAAP reconciliation in the non-compensation expenses, there was a $9.3 million add back this quarter. I think in the press release, it just kind of said just a non-recurring item. Can you provide any additional color on what that charge was?

Those are as we've had in the past from time to time, those could be things such as litigation settlements or corresponding fees, reserves and the like.

Okay. Thank you very much.

As there are no more questions, this concludes our question-and-answer session. I would like to turn the conference back over to Mr. Lutnick for any closing remarks.

Well, thanks. Thank you all for joining us, and we look forward to coming together with you next quarter. We are excited that we have been able to execute on a number of funds that we discussed and we look forward to continuing that process and updating you next quarter on both sides our share repurchases and the success of the company. Thank you all for spending time with us this morning and we look forward to speaking to you again shortly.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.