Item 1.  Business

Investment Technology Group, Inc. was formed as a Delaware corporation on July 22, 1983. Its principal subsidiaries include: (1) ITG Inc. and AlterNet Securities, Inc. (“AlterNet”), institutional broker‑dealers in the United States (“U.S.”), (2) ITG Canada Corp. (“ITG Canada”), an institutional broker‑dealer in Canada, (3) Investment Technology Group Limited (“ITG Europe”), an institutional broker‑dealer in Europe, (4) ITG Australia Limited (“ITG Australia”), an institutional broker‑dealer in Australia, (5) ITG Hong Kong Limited (“ITG Hong Kong”), an institutional broker‑dealer in Hong Kong, (6) ITG Software Solutions, Inc., our intangible property, software development and maintenance subsidiary in the U.S. and (7) ITG Solutions Network, Inc., a holding company for ITG Analytics, Inc., a provider of pre‑ and post‑trade analysis, fair value and trade optimization services, and ITG Platforms Inc., a provider of workflow technology solutions and network connectivity services for the financial community.

ITG is a global financial technology company that helps leading brokers and asset managers improve returns for investors around the world. We empower traders to reduce the end-to-end cost of implementing investments via liquidity, execution, analytics and workflow technology solutions.   The firm is headquartered in New York with offices in North America, Europe, and the Asia Pacific region and offers execution services in more than 50 countries.

ITG’s business is organized into four reportable operating segments: U.S. Operations, Canadian Operations, European Operations and Asia Pacific Operations (see Note 22,   Segment Reporting, to the consolidated financial statements). These four operating segments provide the following categories of products and services:

Regional segment results exclude the impact of corporate activity, which is presented separately and includes investment income from treasury activity, certain non-operating revenues and other gains as well as costs not associated with operating the businesses within the Company’s regional segments. These costs include, among others, (a) the costs of being a public company, such as certain staff costs, a portion of external audit fees, and reporting, filing and listing costs, (b) intangible asset amortization, (c) interest expense, (d) professional fees associated with our global transfer pricing structure, (e) foreign exchange gains or losses and (f) certain non‑operating expenses.

Execution Services

ITG execution services includes liquidity matching through POSIT, self‑directed trading by clients using algorithms (including single stocks and portfolio lists) and smart routing and futures and options trading. ITG execution services also provides execution expertise through portfolio trading and single stock trading desks.

POSIT

POSIT was launched in 1987 as a point‑in‑time electronic crossing network. Today, POSIT provides anonymous continuous and scheduled crossing of non‑displayed (or dark) equity orders and price improvement opportunities within the published best bid and offer price.

POSIT Alert is a block crossing mechanism within POSIT. POSIT Alert scans uncommitted shares from participating clients. When a crossing opportunity is detected, POSIT Alert notifies the relevant buy‑side users that a matching opportunity exists.

The Dark aggregation algorithm (formerly branded as POSIT Marketplace) provides access to POSIT liquidity, the dark pools of other ATSs, and certain exchange dark order types. Dark is a dark pool aggregator that provides clients with access to a large range of non‑displayed liquidity destinations. Dark uses advanced quantitative techniques in an effort to interact with quality liquidity while helping to protect clients from gaming.

ITG’s Algorithms and Smart Order Router

ITG’s algorithms and smart order router offer portfolio managers and traders a way to trade orders quickly, comprehensively and cost‑efficiently from our Execution Management Systems (“EMS”) or our Order Management System (“OMS”) and most third‑party trading platforms. The algorithms execute orders anonymously and discreetly, thereby potentially lowering market impact costs and improving overall performance. ITG’s algorithms help users pursue best execution through two suites: ITG Single‑Stock Algorithms and ITG List‑Based Algorithms.

Our smart order router offers a solution for routing trades that can help capture liquidity with a combination of speed and confidentiality. These routers continuously scan markets for liquidity with an emphasis on trading without displaying the order. Our smart order router uses proprietary techniques to quickly execute at the best available prices.

Single Stock and Portfolio Trading

ITG provides single-stock sales trading as well as portfolio trading for institutional clients. ITG’s trading desks are staffed with experienced trading professionals who provide ITG clients with execution through advanced electronic tools.

Matrix Holding Group

In September 2017, we 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 transaction closed on February 16, 2018. We hold an approximate 20% stake in Matrix and we leverage the technology of this venture to provide derivatives execution to our institutional client base.

Workflow Technology

Execution Management and Order Management

Our EMS is designed to meet the needs of a broad range of trading styles. Triton is ITG’s award‑winning, multi‑asset and broker‑neutral EMS, which brings a complete set of integrated execution and analytical tools to the user’s desktop for global list‑based and single‑stock trading, as well as futures and options capabilities and a fully integrated and supported financial services communications network (ITG Net). Triton also provides traders with access to scalable, low‑latency, multi‑asset trading opportunities.

Our OMS combines portfolio management, compliance functionality (ITG’s Compliance Monitoring System), and a fully integrated and supported financial services communications network (ITG Net) with a consolidated, outsourced service for global trade matching and settlement (Trade Ops) that provides connectivity to the industry’s post‑trade utilities, as well as support for multiple, flexible settlement communication methods and a real‑time process monitor.

ITG Net

ITG Net is a global financial communications network that provides secure, reliable and fully supported connectivity between buy‑side and sell‑side firms for multi‑asset order routing and indication‑of‑interest messages with ITG and third‑party trading platforms. ITG Net supports approximately 9,000 global connections to more than 580 unique execution destinations worldwide. ITG Net also integrates the trading products of third‑party brokers and ATSs into our OMS and EMS platforms.

RFQ‑hub

RFQ‑hub, a multi‑asset platform for global listed and over‑the‑counter (“OTC”) financial instruments, connects buy‑side trading desks and portfolio managers with a large network of sell‑side market makers in Europe, North America and the Asia Pacific region, allowing these trading desks to place requests‑for‑quotes (“RFQ”) in negotiated equities, futures, options, swaps, convertible bonds, structured products and commodities. RFQ‑hub is available as a stand‑alone platform and is also integrated with Triton.

Single Ticket Clearing

ITG’s commitment to best execution also extends to broker‑neutral operational services to help ensure that trades clear and settle efficiently, and to significantly lower the transaction costs associated with trade tickets. Single Ticket Clearing is a broker‑neutral service that aggregates executions across multiple destinations for settlement purposes. Single Ticket Clearing helps reduce the number of trade tickets and resulting charges imposed by custodians, reducing the costs of trade processing due to market fragmentation.

Commission Management Services

ITG offers administration and consolidation of client commission arrangements across a wide range of our clients’ preferred brokerage and research providers through Commission Manager, a robust, multi‑asset, web‑based commission management portal, and Budget Tracker, which enables asset managers to set research valuations and create and track budgets for their end clients. ITG also offers a comprehensive research payment account solution, enabling clients to unbundle research and execution payments to comply with Markets in Financial Instruments Directive (“MiFID”) II regulations.

Analytics

Trading Analytics

Our trading analytics suite enables portfolio managers and traders to improve execution performance before the trade happens (pre‑trade) and during trading (real‑time) by providing reliable trading analytics and risk models that help them perform predictive analyses, manage risk, change strategy and reduce trading costs. Trading costs are affected by multiple factors, such as execution strategies, time horizon, volatility, spread, volume and order size. Our trading analytics suite gauges the effects of these factors and aids in the understanding of the trade‑off between market impact and opportunity cost.

Our transaction cost analysis (“TCA”) offers unique measurement and reporting capabilities to analyze costs and performance across the trading continuum. TCA assesses trading performance and implicit costs under various market conditions so users can adjust strategies and potentially reduce costs and boost investment performance. TCA is also available for foreign exchange transactions (TCA for FX) and for corporate and sovereign bond trading (Fixed Income TCA).

Alpha Capture Reporting measures cost at every point of the investment process and provides portfolio managers with quarterly analytical reviews, written interpretations and on‑site consultative recommendations to enhance performance.

Portfolio Analytics

ITG provides market‑leading tools to assist asset managers with portfolio decision‑making tasks from portfolio construction and optimization to the enterprise challenge of global, real‑time portfolio performance monitoring.

Fair Value helps mutual fund managers meet their obligations to investors and regulators to fairly price the securities within their funds, and helps minimize the impact of market timing.

ITG Opt allows portfolio managers to develop new portfolio construction strategies and solve complex optimization problems. ITG Opt allows users to accurately model tax liability, transaction costs and long/short objectives, while adhering to diverse portfolio‑specific constraints.

Non‑U.S. Operations

ITG has established a strong and growing presence in key financial centers around the world to serve the needs of global institutional investors. In addition to its New York headquarters, ITG has North American offices in Boston, Chicago, Los Angeles, San Francisco and Toronto. In Europe, ITG has offices in London, Dublin and Paris. In the Asia Pacific region, ITG has offices in Hong Kong, Singapore, Sydney and Melbourne. Local representation in regional markets provides an important competitive advantage for ITG. ITG also provides electronic and single stock sales trading for Latin American equities from its New York headquarters, including algorithms for Brazil, Mexico and Chile, and POSIT Alert on-exchange block crossing in Brazil and Mexico, as well as single stock sales trading access into Colombia and Peru.

Canadian Operations

ITG Canada was founded in 2000. ITG Canada provides electronic brokerage services, including ITG’s algorithms and smart order router, as well as single stock execution, portfolio trading services and commission management services. In addition, ITG Canada provides Triton, connectivity services, Single Ticket Clearing, ITG Opt, trading analytics, TCA, and Fair Value. ITG Canada also engages in foreign exchange trading to facilitate equity trades by clients in different currencies as well as other client foreign exchange trades unrelated to equity trades.

In July 2007, ITG Canada launched MATCHNow, an ATS for Canadian‑listed equities, operated by ITG’s wholly‑owned subsidiary, TriAct Canada Marketplace LP (“TriAct”). MATCHNow is a leading dark pool ATS in Canada, offering a call auction marketplace with a confidential non‑displayed book with trades executed at or within the Canadian National Best Bid and Offer.

European Operations

ITG Europe was established as a broker‑dealer in 1998. Today, ITG Europe focuses on trading European, Middle Eastern and African equities as well as providing ITG’s technologies to its clients. ITG Europe provides electronic brokerage services including ITG’s algorithms and smart order router, and the POSIT suite, as well as single stock execution services, portfolio trading services and commission management services. In January 2018, ITG (a) expanded its dark cash equity orders segment to include an any price point system and reference price system, in each case, for large sized orders that will not be subject to planned European double volume caps set at 4% of all the dark regulated venue trading volume in a given security for any individual dark venue and 8% of such volume for all dark trading venues in the aggregate and (b) launched POSIT Auction, a lit segment on the POSIT Multilateral Trading Facility (“MTF”) which seeks to provide additional access to liquidity under MiFID II trading rules. In Europe, ITG provides Triton, OMS, connectivity services, Single Ticket Clearing, RFQ‑hub, TCA, Alpha Capture Reporting, trading analytics and Fair Value.

Asia Pacific Operations

Australia

In 1997, ITG launched ITG Australia, an institutional brokerage firm specializing in execution and analytics for Australian‑listed equities. ITG provides clients with a range of products and services including trade execution, trade execution management through Triton, connectivity services and pre‑ and post‑trade analysis through TCA and trading analytics. Trade execution services include electronic brokerage products such as ITG’s algorithms and the POSIT suite, as well as single stock trading.

Hong Kong

In 2001, ITG formed ITG Hong Kong, an institutional broker‑dealer focused on developing and applying ITG’s technologies across the Asian markets. Execution services are provided through electronic brokerage products such as ITG’s algorithms and the POSIT suite and through an experienced single stock and portfolio trading services team. Other trading and analytical tools provided by ITG Hong Kong include Triton, connectivity services, TCA and trading analytics.

Singapore

In 2010, ITG Singapore Pte. Limited (“ITG Singapore”) obtained a Capital Markets Services License from the Monetary Authority of Singapore (“MAS”). ITG Singapore provides clients in Singapore with a range of ITG’s products and services including trade execution management through Triton and trading analysis through TCA and trading analytics.

Competition

The financial services industry generally, and the institutional securities brokerage business in which we operate, are extremely competitive, and we expect them to remain so for the foreseeable future. Our full suite of products does not directly compete with any particular firm; however, individual products compete with various firms and consortia:

In many cases we face competitors that are larger than we are and have greater financial resources than we have. These competitors may have more flexibility to offer a broader set of products and services than we can. Competition is also intense for the recruitment and retention of qualified professionals. The performance of our business is in large part dependent on the skills, expertise and performance of our employees. Our ability to continue to compete effectively in our businesses will depend upon our continued ability to attract new professionals and retain and motivate our existing professionals.

Regulation

Certain of our subsidiaries are subject to various securities regulations and capital adequacy requirements promulgated by the regulatory and exchange authorities of the countries in which they operate. In the U.S., the Securities and Exchange Commission (“SEC”) is the federal agency responsible for the administration of the federal securities laws, with the regulation of broker‑dealers primarily delegated to self‑regulatory organizations (“SROs”), principally the Financial Industry Regulatory Authority (“FINRA”) as well as other national securities exchanges. In addition to federal and SRO oversight, securities firms are also subject to regulation by state securities administrators in those states in which they conduct business. Furthermore, our non‑U.S. subsidiaries are subject to regulation by central banks and regulatory bodies in those jurisdictions where each subsidiary is authorized to do business, as further discussed below. The SROs, central banks and regulatory bodies conduct periodic examinations of our broker‑dealer subsidiaries in accordance with the rules they have adopted and amended from time to time.

ITG’s principal regulated subsidiaries are listed below. The principal self‑regulator of our U.S. broker‑dealers is FINRA.

Broker‑dealers are subject to regulations covering all aspects of the securities trading business, including sales methods, trade practices, investment research distribution, anti-money laundering/anti-bribery compliance, use and safekeeping of clients’ funds and securities, capital structure, record keeping, technology implementation, risk management and conduct of directors, officers and employees. Additional legislation or changes in the interpretation or enforcement of existing laws and rules may directly affect the mode of operation and profitability of broker‑dealers. The SEC, SROs, state securities commissions and foreign regulatory authorities may conduct administrative proceedings or commence judicial actions, which can result in censure, judgments, settlements, fines, disgorgements, penalties, injunctions, the issuance of cease‑and‑desist orders or the suspension or expulsion of a broker‑dealer, its directors, officers or employees.

ITG Inc. and AlterNet are required by law to belong to the Securities Investor Protection Corporation (“SIPC”). In the event of a U.S. broker‑dealer’s insolvency, the SIPC fund provides protection for client accounts up to $500,000 per customer, with a limitation of $250,000 on claims for cash balances. ITG Canada and TriAct are required by Canadian law to belong to the Canadian Investors Protection Fund (“CIPF”). In the event of a Canadian broker‑dealer’s insolvency, CIPF provides protection for client accounts up to CAD $1 million per customer. ITG Europe is required to be a member of the Investor Compensation Protection Schemes which provides compensation to retail investors in the event of certain stated defaults by an investment firm. ITG Hong Kong is regulated by the SFC. The SFC operates the Investor Compensation Fund which provides compensation to retail investors in the event of a default by a regulated financial institution. ITG Australia is obligated to contribute to the ACH Clearing Fund and/or the National Guarantee Fund if and when requested by ASIC. In the past twelve months, no such requests have been made of ITG Australia.

Regulation ATS

Regulation ATS permits U.S. “alternative trading systems” such as POSIT to match orders submitted by buyers and sellers without having to register as a national securities exchange. Accordingly, POSIT is not registered with the SEC as an exchange. We continue to review and monitor POSIT’s systems and procedures to ensure compliance with

Regulation ATS. The Form ATS describing the operations of POSIT in the U.S. is publicly available at http://www.itg.com/about/transparency/.

Net Capital Requirement

ITG Inc. and AlterNet are subject to the Uniform Net Capital Rule (Rule 15c3‑1) under the Exchange Act, which requires the maintenance of minimum net capital.

ITG Inc. has elected to use the alternative method permitted by Rule 15c3‑1, which requires that ITG Inc. maintain minimum net capital equal to the greater of $1.0 million or 2% of aggregate debit balances arising from customer transactions, as defined. AlterNet has elected to use the basic method permitted by Rule 15c3‑1, which requires that they maintain minimum net capital equal to the greater of 6 2 / ₃ % of aggregate indebtedness or $100,000. Dividends or withdrawals of capital cannot be made if capital is needed to comply with regulatory requirements.  In addition, our Canadian, European and Asia Pacific Operations have subsidiaries with regulatory capital requirements.

For further information on our net capital position, see Note 16, Net Capital Requirement , to the consolidated financial statements.

Research and Product Development

We devote a significant portion of our resources to the development and improvement of technology‑based services. Important aspects of our research and development efforts include enhancements of existing software, the ongoing development of new software and services and investment in technology to enhance our efficiency.

The amounts expensed for research and development costs, excluding routine maintenance, for the years ended December 31, 2017, 2016 and 2015 are estimated at $32.8 million, $31.8 million and $29.2 million, respectively.

Intellectual Property

Patents and other proprietary rights are important to our business. We also rely upon trade secrets, know‑how, continuing technological innovations, and licensing opportunities to maintain and improve our competitive position.

We own a portfolio of patents and patent applications, in the U.S. and abroad, that principally relate to financial services, information technology and software. Patents for individual products extend for varying periods according to the date of patent filing or grant and the legal term of patents in the various countries where patent protection is obtained. We also own and maintain a portfolio of trademarks. The extent and duration of trademark rights are dependent upon national laws and use of the trademarks.

While we consider our patents and trademarks to be valued assets, we do not believe that our competitive position is heavily dependent on patent or trademark protection or that our operations are dependent upon any single patent or group of related patents.

It is our practice to enter into confidentiality and intellectual property ownership agreements with our clients, employees, independent contractors and business partners, and to control access to, and distribution of, our intellectual property.

Clients

For the years ended December 31, 2017, 2016 and 2015, no single client accounted for more than 5% of our consolidated revenue.

Employees

On December 31, 2017, the Company employed 934 staff globally, of whom 581, 89, 155, and 109 staff were employed by the U.S., Canadian, European and Asia Pacific Operations, respectively.

Website and Availability of Public Reports

Our website can be found at http://www.itg.com . From time to time, we may use our website as a channel of distribution of material company information. Financial and other material information is routinely posted and accessible on the investor relations section of our corporate website, http:// investor.itg.com . We are not including the information contained on our website as part of, or incorporating it by reference into, this Annual Report on Form 10‑K.

We are required to file reports and other information with the SEC. Our Annual Reports on Form 10‑K, Quarterly Reports on Form 10‑Q and Current Reports on Form 8‑K, together with any amendments to those reports are available without charge on our website at http://investor.itg.com . We make this information available on our website as soon as reasonably practicable after we electronically file such information with, or furnish it to, the SEC. A copy of these filings is also available at the SEC’s website ( www.sec.gov ). Additionally, you may read and copy any documents filed by us at the SEC’s Public Reference Room at 100 F Street, N.E., Washington, D.C. 20549. Please call the SEC at 1‑800‑SEC‑0330 for further information on the Public Reference Room.

new products or decommission legacy products, the expenses related to such investments could cause reduced profitability or losses.

We may not have sufficient cash flows from operating activities, cash on hand and the ability to obtain borrowing capacity to finance required capital expenditures, fund strategic initiatives and meet our other cash needs. These obligations require a significant amount of cash, and we may need additional funds, which may not be readily available.

We depend on the availability of adequate capital to maintain and develop our business and meet our regulatory capital requirements. Although we believe that we can meet our ongoing operating cash and regulatory capital needs from our cash flow from operations, our existing cash balances and our available credit facilities, if cash on hand and cash flow from operations are not sufficient to meet our needs, our ability to borrow additional funds may be impacted by financial lending institutions’ ability or willingness to lend to us on commercially acceptable terms and we may become subject to covenants even more restrictive than those contained in our current credit facilities. If, for any reason, we are unable to comply with the covenants under our existing or future credit facilities, we may not be able to borrow additional funds under commercially acceptable terms or may not be granted waivers or amendments to such restrictions, such waivers or amendments may be provided at significant additional cost to us or we may not be able to refinance our debt on terms acceptable to us, or at all. The lenders under our current credit facilities also have the right to terminate any commitments they have to provide further borrowings in certain circumstances and, in an event of default, if not cured or waived, could result in the acceleration of all or substantially all of our debt or the loss of the assets securing our debt. 

A prolonged period of low levels of operating cash flow together with limited access to capital or credit in the future could have an impact on our ability to, among others, meet our regulatory capital requirements, invest in our software and infrastructure, engage in strategic initiatives, make acquisitions or strategic investments in other companies, react to changing economic and business conditions, repay our outstanding debt, make dividend payments or repurchase shares of our common stock. If we are unable to generate sufficient cash flow from operations or borrow additional funds to fund our capital or credit requirements, it could have an adverse effect on our business, financial condition and operating results.

We will need to continue to invest in our operations for the foreseeable future to fund our strategic initiatives including the ongoing investment program under the Strategic Operating Plan we announced in July 2016. If we do not achieve the expected operating results, we may need to seek additional financing in the debt or equity markets or sell selected assets or reduce or delay planned capital, research or development expenditures.  These measures may not be successful and may harm our business and prospects. In addition, any financing, or sale of assets might not be available, or may not be available on economically favorable terms.

A failure in the design, operation or configuration of our technology could adversely affect our profitability and reputation.

A technological failure or error of one or more of our products or systems, including but not limited to POSIT, our algorithms, smart routers, and order and execution management systems, could result in lost revenues and/or significant market losses. We operate complex trading systems, algorithms and analytical products that may fail to correctly model interacting or conflicting trading objectives, unusual market conditions, available trading venues and other factors, which may cause unintended results. Similarly, the operation and configuration of our systems can be quite complex and departure from standard procedures can result in adverse trading outcomes. Such problems could cause us to incur trading losses, lose clients or experience other reputational harm resulting in lost revenues and profits. Our quality assurance testing cannot test for all potential scenarios or ensure that the technology will function as designed and intended in all cases.

Failure to keep up with rapid changes in technology while continuing to seek to provide leading products and services to our customers could negatively impact our results of operations.

The institutional brokerage industry is subject to rapid technological change and evolving industry standards. Our customers’ demands become greater and more sophisticated as the dissemination of products and information to customers increases. If we are unable to anticipate and respond to the demand for new services, products and

technologies, innovate in a timely and cost‑effective manner and adapt to technological advancements and changing standards, we may be unable to compete effectively, which could have a material adverse effect on our business. Many of our competitors have significantly greater resources than we do to fund such technological advances. Moreover, the development of technology‑based services is a complex and time‑consuming process. New products and enhancements to existing products can require long development and testing periods. Significant delays in new product releases, failure to meet key deadlines, or significant problems in creating new products could negatively impact our revenues and profits.

Insufficient system capacity, system operating failures, or disasters could materially harm our reputation, financial position and profitability.

The success of our business is dependent on the computer and communications systems supporting our operations, which must monitor, process and support a large volume of transactions across numerous execution venues in many countries and multiple currencies. As our business continues to expand, we will need to continue to expand our systems to accommodate an increasing volume of transactions across a larger client base and more geographical locations. In addition, certain changes in market practices may require us to invest in infrastructure to increase capacity levels. Unexpectedly high volumes or times of unusual market volatility could cause our systems to operate slowly, decrease output or even fail for periods of time, as could general power or telecommunications failures, hardware failures, software errors, data center outages, human error, computer viruses, acts of vandalism, natural disasters, terrorist activities, cybersecurity breaches or other business disruptions. System failure or degradation could adversely affect our ability to effectuate transactions and lead our customers to file formal complaints with industry regulatory organizations, initiate regulatory inquiries or proceedings, file lawsuits against us, trade less frequently through us or cease doing business with us. In turn, we could incur financial loss, liability to clients, regulatory intervention or reputational damage.

Our corporate headquarters and largest concentration of employees and technology is in the New York metropolitan area. Our other offices are also located in major cities around the globe. If a business system disruption were to occur, especially in New York, for any reason, including widespread health emergencies, natural disasters or terrorist activities, and we were unable to execute our business continuity plan, or our business continuity plan proves insufficient, it could have a material effect on our business. Moreover, we have varying levels of business continuity plan coverage among our non‑U.S. subsidiaries.

Any system capacity or operational failure or business system disruption could result in regulatory or legal claims. We could incur significant costs in defending such regulatory or legal claims, even those without merit. Moreover, such failures could result in the need to remediate issues and repair or expand our networks and systems. Any obligation to expend significant resources to defend claims or repair and expand infrastructure could have an adverse effect on our financial condition and results of operations.

Our systems and those of our third‑party service providers may be vulnerable to cybersecurity risks.

Our business relies on the secure collection, storage, processing and transmission of proprietary information, including our clients’ confidential data, in our internal systems and through our vendor networks and communications infrastructure. Increased cybersecurity threats pose a risk to this information, in addition to our and our third-party service providers’ systems and networks. While we have not been the victim of cyber‑attacks that have had a material impact on our operations or financial condition, we have experienced cyber security incidents such as denial of service attempts, malware infections, phishing attempts, and other attempts at compromising our information technology that are typical for a company of our size that operates in the global financial marketplace. Our systems also may be vulnerable to unauthorized access, computer viruses, acts of vandalism, or other malicious code, cyber-attack and other adverse events that could have a negative impact, including loss or destruction of data (including confidential client information) and unavailability or disruption of service. Despite our efforts to implement industry‑standard security measures, we face the risk that our security measures may prove insufficient as attacks have resulted in material breaches against other financial services companies with significant security controls and the nature of cyber threats continues to evolve. These threats may come from external factors such as governments, organized crime, hackers, and other third parties such as outsource or infrastructure-support providers and application developers, or may originate internally from within us. System errors that result from these acts may be repeated or compounded before they are discovered and rectified. Successful security breaches of our systems or the systems of certain of our vendors could expose us to a risk of misappropriation of our or our clients’ confidential information, the corruption or deletion of data, and the disruption of

our services to our clients. These outcomes could result in reputational damage, loss of clients, lower trading volumes, a negative impact on our competitive position, significant expense in implementing future security measures, litigation, and regulatory inquiries or proceedings, all of which could adversely impact our financial results.

Financial services regulators in recent years have increased their examination and enforcement focus on matters relating to cybersecurity threats, including the assessment of firms’ vulnerability to cyber-attacks. In particular, regulatory concerns have been raised about firms establishing effective cybersecurity governance and risk management policies, practices and procedures; protecting firm networks and information; identifying and addressing risk associated with remote access to client information; identifying and addressing risks associated with client business partners, counterparties, vendors, and other third parties, including exchanges and clearing organizations; preventing and detecting unauthorized activities; adopting effective mitigation and business continuity plans to address the impact of cybersecurity breaches; and establishing protocols for reporting cybersecurity incidents. Although we maintain insurance coverage that, subject to policy terms and conditions, covers certain aspects of cyber risks, such insurance coverage may be insufficient to cover all losses and would not protect us from the effects of adverse regulatory actions that may result from the incident or a finding that we had inadequate cybersecurity controls, or any follow-on litigation, including the reputational harm that could result from such regulatory actions, findings or litigation.

We are dependent on certain third party vendors for key services.

We depend on a number of third parties to supply elements of our trading systems, computers, market data, data centers, access to trading in certain markets, FIX connectivity, communication network infrastructure, other equipment and related support and maintenance. We cannot be certain that any of these providers will be willing or able to continue to provide these services in an efficient and cost‑effective manner or to meet our evolving needs. Moreover, we are dependent on our communications network providers for interconnectivity with our clients, markets and clearing agents to service our customers and operate effectively. We have also made substantial investments in our infrastructure to provide improved business recovery capabilities in the event of potential outages at our third-party service providers. If our vendors fail to meet their obligations, provide poor, inaccurate or untimely service, we are unable to make alternative arrangements for the supply of these services, we are unable to execute our business recovery plan, or our business recovery plan proves insufficient, we may fail, in turn, to provide our services or to meet our obligations to our customers, and our business, financial condition and our operating results could be materially harmed.

Our securities business and related clearing operations expose us to material liquidity risk.

We self‑clear equity transactions in the U.S. and Australia. In those markets, we may be required to provide considerable additional funds with clearing and settlement organizations, such as the National Securities Clearing Corporation or Depository Trust and Clearing Corporation in the U.S., especially during periods of high market volatility. In addition, regulatory agencies have required these clearing and settlement organizations to increase the level of margin deposit requirements over time and they may continue to do so in the future. We rely on our excess cash, certain established credit facilities and the use of outsourced clearing arrangements to meet or reduce those demands. While we have historically met requests for additional margin deposits, there is no guarantee that our excess cash and our established credit facilities and clearing arrangements will be sufficient for future needs, particularly if there is an increase in requirements. There is also no guarantee that these established credit facilities and outsourced clearing arrangements will continue to be available to us.

In addition, each of our broker‑dealer subsidiaries worldwide is subject to regulatory capital requirements promulgated by the applicable regulatory and exchange authorities of the countries in which they operate. Growth in trading activity in certain jurisdictions outside the U.S. has led, and could continue to lead to, higher regulatory capital requirements. While we have recently implemented measures to reduce our regulatory capital requirements outside the U.S., there can be no assurance that we will be able to implement similar measures in the future.  Moreover, regulatory or exchange authorities may seek to increase our regulatory capital requirements in the future and any modification to our business may result in increased regulatory capital requirements.    

The failure by any of these subsidiaries to maintain its required regulatory capital may lead to suspension or revocation of its broker‑dealer registration and its suspension or expulsion by its regulatory body. Historically, all regulatory capital needs of our broker‑dealers have been provided by existing cash and cash from operations. However, if existing cash together with cash from operations are not sufficient, we may need to reject orders from clients and we may ultimately breach regulatory capital requirements.  

Furthermore, if our broker-dealer subsidiaries are subject to new or modified regulatory capital rules or requirements, or fines, penalties or sanctions due to increased or more stringent enforcement, it could materially limit or reduce the liquidity we may need to expand or even maintain our then-present levels of business, which could have a material adverse effect on our business, results of operations and financial condition.

As a clearing member firm in certain jurisdictions we are subject to significant default risk.

We are required to finance our clients’ unsettled positions from time to time and we could be held responsible for the defaults of our clients. Default by our clients may also give rise to our incurring penalties imposed by execution venues, regulatory authorities and clearing and settlement organizations. Although we regularly review our credit exposure, default risk may arise from events or circumstances that may be difficult to detect or foresee. In addition, concerns about, or a default by, one institution could lead to significant liquidity problems, losses or defaults by other institutions that could in turn adversely affect us.

In certain jurisdictions we are dependent on third-party clearing agents and any failures by such clearing agents could materially impact our business and operating results.

In certain jurisdictions we are dependent on agents for the clearing and settlement of securities transactions. If our agents fail to properly facilitate the clearing and settlement of our customer trades, we could be subject to financial, legal and regulatory risks and costs that may impact our business and operating results. In addition, it could cause our clients to reduce or cease their trading with us, which would adversely affect our revenues and financial results.

Moreover, certain of our agreements with clearing agents may be terminated upon short notice. There is no guarantee that we could obtain alternative services in a timely manner and any interruption of the normal course of our trading and clearing operations could have a material impact on our business and results of operations.

Our business exposes us to credit risk that could affect our operating results and profitability.

We are exposed to credit risk from third parties that owe us money, securities or other obligations, including our customers and trading counterparties. These parties may default on their obligations to us due to bankruptcy, lack of liquidity, operational failure or other reasons, and we could be held responsible for such defaults. In addition, client trading errors which they are unable or unwilling to cover may cause us to incur financial losses. Volatile securities markets, credit markets and regulatory changes may increase our exposure to our customers’ credit profiles, which could adversely affect our financial condition and operating results. Our review of the credit risk of trading counterparties may not be adequate to provide sufficient protection from this risk.

We may incur material losses on foreign exchange transactions entered into on behalf of clients and be exposed to material liquidity risk due to counterparty defaults or errors.

We enable clients to settle cross‑border equity transactions in their local currency through the use of foreign exchange contracts. These arrangements typically involve the delivery of securities or cash to a counterparty that is not processed through a central clearing facility in exchange for a simultaneous receipt of cash or securities. We may operate as either a principal or agent in these transactions. As a result, a default by one of our counterparties prior to the settlement of their obligation could materially impact our liquidity and have a material adverse effect on our financial condition and results of operations.

In addition, we are exposed to operational risk. Employee and technological errors in executing, recording or reporting foreign exchange transactions may result in material losses due to the large size of such transactions and the underlying market risk in correcting such errors.

Our limited principal trading exposes us to risk of loss.

We engage in a limited amount of principal trading, which exposes us to risk of loss due to market fluctuations and volatility.  For example, in our Canadian Operations, a limited portion of our revenues is derived from principal trading activities including the net spread on foreign exchange contracts executed to facilitate equity trades by clients in different currencies and trading exchange traded funds (“ETFs”) to facilitate the creation or redemption of an ETF.  In

addition, in limited circumstances, we may transact on a principal basis in the normal course of agency trading by taking temporary positions in securities (including trade errors and client trade accommodations). Although we attempt to close out all of our positions by the end of the day, we bear the risk of market fluctuations and we may incur losses due to changes in the prices of such securities and currencies. Any principal gains or losses resulting from these positions could have a disproportionate effect, positive or negative, on our revenues and profits, and could also result in reputational damage.

Our Canadian Operations also derive a limited portion of its revenues from the principal trading of spot and short‑dated forward foreign exchange contracts with clients that may not be related to equity trades. Although we seek to execute offsetting foreign exchange contracts concurrently with any client trades, earning a net spread, there can be no assurances that the trades are in fact concurrent (and therefore we bear the risk of market fluctuations). In addition, foreign exchange contracts are not centrally cleared and therefore we bear counterparty and settlement risk on such trades.

Our risk management policies and procedures may not be effective and may leave us exposed to unidentified or unexpected risks.

We seek to monitor and control our risk exposure through a risk and control framework encompassing a variety of separate but complementary financial, credit, operational, technological, compliance and legal reporting systems, internal controls, management review processes and other mechanisms that rely on a combination of technical and human controls and supervision, including our global risk committee. These policies, procedures and practices used to identify, monitor and control a variety of risks may fail to be effective. As a result, we face the risk of losses, including, for example, losses resulting from trading errors, customer defaults, fraud and money laundering.

Internal control over financial reporting, no matter how well designed, has inherent limitations. Therefore, internal control over financial reporting determined to be effective can provide only reasonable assurance with respect to financial statement preparation and may not prevent or detect all misstatements. Moreover, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. As such, we could lose investor confidence in the accuracy and completeness of our financial reports, which may have a material adverse effect on our stock price.

The business in which we operate is extremely competitive worldwide.

Many of our competitors have substantially greater financial, technical, marketing and other resources than we do, which, among other things, enable them to compete with the services we provide on the basis of price, including lowering prices for certain of our key services to gain business in their higher margin areas, and a willingness to commit their firms’ capital to service their clients’ trading needs on a principal, rather than on an agency basis. In addition, many of our competitors offer a wider range of bundled services, have broader name recognition, and have larger customer bases than we do. Some of our competitors have long‑standing, well‑established relationships with their clients, and also hold dominant positions in their trading markets. Moreover, new entrants may enter the market with alternative methods of providing trade execution and related services, and existing competitors often launch new initiatives. The trend toward increased competition in our business is expected to continue, and it is possible that our competitors may acquire increased market share.   Many of our competitors have undertaken measures to link various electronic trading systems and platforms in an effort to attract order flow to off‑exchange venues and increase internal executions.

Although we believe that our products and services have established certain competitive advantages, our ability to maintain these advantages will require continued enhancements to our products, investment in the development of our services, additional marketing activities and enhanced customer support services. In addition, there can be no assurance that we will have sufficient resources to continue to make investments in development of our services, that our competitors will not devote significantly more resources to competing services or that we will otherwise be successful in maintaining our market position. If competitors offer superior services, our market share would be affected and this would adversely impact our business and results of operations.

We face certain challenges and risks to our international business that may adversely affect our strategy.

Global client coverage is a key component of our business plan. We have invested significant resources in our foreign operations and the globalization of our products and services. However, there are certain risks inherent in the operation of our business outside of the U.S., including, but not limited to, additional regulatory capital requirements, less developed technology and infrastructure, and higher costs for infrastructure. These risks may limit our ability to provide services to clients in certain markets. There also may be difficult processes for obtaining regulatory approvals. This could result in delays in our global business plans, difficulties in staffing foreign operations and adapting our products to foreign markets, practices and languages, exchange rate risks and the need to meet foreign regulatory requirements. Each of these could force us to alter our operational plans and this may adversely impact our strategy.

Political and economic uncertainty arising from the outcome of the June 2016 referendum in which the people of the United Kingdom voted in favor of an exit from the European Union (the “EU”) could adversely impact our business, results of operations and financial condition.

There is substantial political and economic uncertainty surrounding the referendum held on June 23, 2016 in which the citizens of the United Kingdom voted in favor of an exit from the EU (often referred to as Brexit). Negotiations have commenced to determine the terms of the United Kingdom’s future relationship with the EU, including the terms of trade between the United Kingdom and the EU. It is unclear how the United Kingdom’s access to the EU single market, and the wider trading, legal and regulatory environment in which we and our clients operate, will be impacted and how this will affect our and their businesses. The announcement of Brexit caused, and further developments may continue to cause, significant volatility in global stock markets and currency exchange rate fluctuations. The uncertainty surrounding the terms of the United Kingdom’s exit and its consequences could adversely impact client and investor confidence, result in additional market volatility, lead to significant regulatory changes and adversely affect our businesses, including our revenues from trading activities in Europe, and our results of operations and financial condition.

We incur risks related to our international business due to currency exchange rate fluctuations that could impact our financial results and financial position.

We have significant operations outside of the U.S., with 51% of our 2017 consolidated revenues denominated in non-U.S. dollar currencies. We currently operate and continue to expand globally, principally through our operations in Canada, Europe and Asia Pacific as well as through the development of specially tailored versions of our services to meet the needs of our clients who trade in international markets. We therefore have significant exposure to currency exchange rate fluctuations primarily between the U.S. Dollar and the British Pound Sterling, Euro, Swiss Franc, Scandinavian currencies, Australian Dollar, Canadian Dollar, Japanese Yen and Hong Kong Dollar. When the U.S. Dollar strengthens against these currencies, the U.S. Dollar value of non‑U.S. Dollar‑based revenue and profit decreases. These fluctuations may materially impact the translation of our non‑U.S. results of operations and financial condition into U.S. dollars as part of the preparation of our consolidated financial statements.

We are dependent on certain major customers and a decline in their use of our services could materially impact our revenues.

The chart below sets forth our dependence on our three largest clients individually, as well as on our ten largest clients in the aggregate, expressed as a percentage of total revenues:

Our customers may reduce or discontinue their use of our trading execution services or other services at any time. There can be no assurance that we will be able to retain these major customers or that such customers will maintain or increase their demand for our trade execution or other services. The loss, or a significant reduction, of demand for our services from any of these customers could have a material adverse effect on our business, financial condition and results of operations.

Legislative or regulatory changes, including within the securities markets and the brokerage industry, could materially impact our business.

We currently operate POSIT in the U.S. under Regulation ATS, our European operations are subject to MiFID II and we must comply with the requirements of the U.S. PATRIOT Act and its foreign equivalents for monitoring our customers and any suspicious transactions. Moreover, most aspects of our broker‑dealer operations are highly regulated, such as sales and reporting practices, operational compliance, capital requirements and licensing of employees. Accordingly, we face the risk of significant intervention by regulatory authorities in all jurisdictions in which we conduct business, such as the SEC and FINRA in the U.S. and their equivalents in other countries. As we continue to operate or expand our business, we may be exposed to increased and different types of regulatory requirements.

We are subject to, and in the future we may become subject to, new regulations or changes in the interpretation or enforcement of existing regulations, which may adversely affect our business. Also, regulatory changes that impact how our customers conduct their business may impact our business and results of operations. The current U.S. administration and other members of the U.S. federal government and other governments outside of the U.S. may implement new or revised regulatory requirements for the financial services industry. Any changes to the regulatory rules could cause us to expend more significant compliance, business and technology resources, incur additional operational costs and create additional regulatory exposure.

On June 24, 2014, the SEC issued an order mandating the U.S. exchanges to implement the National Market System Plan to Implement a Tick Size Pilot Program (the “Pilot”). The Pilot was implemented on October 3, 2016. The Pilot will last for two years and it has changed the minimum ‘tick sizes’ (quoting and trading increments) for 1,200 Regulation NMS common stocks with small market capitalizations. The plan also includes a ‘trade‑at’ prohibition for 400 of the Regulation NMS stocks covered by the Pilot that would prevent price matching by a trading center, such as a dark pool, that is not displaying a protected bid or protected offer, subject to certain exceptions. The Pilot is intended to allow the SEC, SROs, and the public to evaluate and assess the impact of increment conventions (and, in the case of the trade-at prohibition, the impact of limiting price matching by firms not publishing quotations)   on the liquidity and trading of stocks of small-capitalization companies. If the Pilot (specifically the trade‑at prohibition) is expanded to more securities, the program could reduce our U.S. trading volumes. Moreover, the SEC adopted the Consolidated Audit Trail rule (“CAT”) in July 2012, which requires SROs to establish an order trail reporting system that would enable regulators to track, within 24 hours of the trade date, information related to orders in NMS securities (generally, exchange-listed stocks and exchange-listed options) and OTC equity securities   received and executed across the securities markets. The SEC approved a national market system plan for implementation of the CAT that had been submitted by the exchanges and FINRA on November 15, 2016. As a non‑small industry member, the expected start date for us to begin reporting CAT data is November 2018, which will result in significant implementation costs and increased ongoing administrative expenses and burdens.

On November 19, 2014, the SEC unanimously adopted Regulation Systems Compliance and Integrity (“Regulation SCI”). The regulation became effective on February 3, 2015 and the compliance date was November 3, 2015. The rule requires SCI entities (i.e., exchanges, SROs, clearing and settlement agencies, and certain ATSs) to establish extensive policies, procedures, and/or controls to ensure the capacity, stability, integrity, and resiliency of their trading and regulatory reporting systems. Regulation SCI, among other things, also requires the reporting of certain systems issues, testing of business continuity and disaster recovery plans with mandatory participation by customers and members, the establishment of geographically diverse backup capabilities, the completion of an objective annual review of systems, and the maintenance and preservation of certain books and records concerning matters covered by the rule. To the extent Regulation SCI becomes applicable to us (as a result of POSIT or otherwise), we could experience significant implementation costs as well as increased ongoing administrative expenses and burdens.

On November 18, 2015, the SEC proposed amendments (the “ATS Proposal”) to Regulation ATS and related rules under the Exchange Act to enhance transparency requirements on, and increase the SEC’s oversight of, ATSs that facilitate transactions in National Market System stocks (generally, exchange-listed equities) (“NMS Stock ATSs”).  This would require, among other things, a publicly-available Form ATS-N containing disclosures about the operation of the ATS and the interactions between the ATS, its affiliates, and other firm products (e.g. smart routers and algorithms). The level of disclosure that would be required under the ATS Proposal and the SEC’s ongoing involvement in approving or reviewing the design and operations of NMS Stock ATSs would bring the regulation of NMS Stock ATSs closer to the way in which national securities exchanges are currently regulated.  To the extent that the ATS Proposal results in a significant increase in regulatory requirements associated with operating an NMS Stock ATS and the need to disclose

sensitive business information, it could have adverse consequences on ATSs, including POSIT, such as increased administrative expenses and burdens.

In addition, new regulatory obligations have been proposed, adopted or implemented that pertain to our business outside of the United States, which may also have a material impact upon our business model.

In addition, a financial transaction tax (the “European FTT”) is being considered which would include at least ten of the twenty‑eight members of the EU. In addition to the impact that such tax would have on the affected securities and signatory countries, certain alternative versions of the proposals could include an extra‑territorial scope that may impact the trading activities of entities which are, and trade entirely outside, the European FTT zone.

The EU also adopted a comprehensive General Data Privacy Regulation (the “GDPR”) in May 2016 that will replace the current 1995 European Union Directive on Data Protection   and related country-specific legislation. The GDPR will become fully effective in May 2018. The GDPR requires companies to satisfy new requirements regarding the monitoring of EU data subjects and the handling of their personal data, including its use, protection and the ability of persons whose data is stored to correct or delete such data about themselves. Under certain circumstances, the GDPR may require us to provide notification to affected individuals and/or data protection authorities in the event of a data breach. Failure to comply with GDPR requirements could result in penalties of up to the greater of €20 million or 4% of worldwide revenue.

Compliance with certain of these adopted laws, rules or regulations of the various jurisdictions in which we operate could result in the loss of revenue and has caused us, and could cause us, to incur significant costs. In addition, if any new regulatory obligations are implemented, ITG could incur significant costs to establish the appropriate processes, systems, and/or controls. Last, if we fail to comply adequately with any of these laws, rules or regulations, we may be subject to censure, fines, judgments, settlements, disgorgements, penalties, injunctions, cease‑and‑desist orders, suspension of our business, suspensions of personnel, or other sanctions or relief, including revocation of our exchange or self‑regulatory organization memberships or our broker‑dealer registrations.

Increased regulatory scrutiny has led to, and will continue to lead to, increased costs associated with responding to investigations and inquiries and the potential for penalties and necessary remediation, which we expect to negatively impact our profitability and could harm our reputation.

In recent years, there has been increased regulatory scrutiny of our industry by regulators and other governmental authorities, including a focus on, among other areas, trading risk management controls, market abuse, fee and pricing transparency, undisclosed trading practices and dark pool operations, resulting in an increase in regulatory investigations, inquiries and reviews. Our broker-dealer subsidiaries are subject to, or involved in, investigations and other proceedings by government agencies and self-regulatory organizations, with respect to which we are cooperating. Our broker-dealer subsidiaries have been the subject of claims alleging the violation of securities laws, rules and regulations, some of which have resulted in the payment of disgorgement, penalties, fines, awards, judgments and settlements. Such enhanced scrutiny has caused, and we expect it to continue to cause, ITG to incur significant costs in light of the legal and compliance resources needed to respond to such investigations and proceedings, in addition to

monetary penalties and increased compliance costs, that could arise from such investigations and proceedings. Such regulatory or other actions may also be directed at certain of our past and present executives, employees or directors and we may be required to indemnify these individuals in regard to these matters. The risks associated with such matters are often difficult to assess or quantify, and their existence and magnitude often remain unknown or uncertain for substantial periods of time. A settlement of, or judgment related to, such matters could result in civil or criminal liability, disgorgement, penalties, fines, restrictions or limitations on our operations and activities and other sanctions, could lead to related private litigation and could otherwise have a material adverse effect on our businesses, results of operations, financial condition and prospects. Any such investigation, inquiry or action could also cause us significant reputational harm. In addition, regardless of the outcome of such matters, we have incurred and will continue to incur significant legal and other costs, including substantial management time, dealing with such matters.

Our business has been and may continue to be adversely affected by our customers’ reaction to SEC or other regulatory proceedings.

In August 2015, we paid $20.3 million to settle the SEC’s investigation into a proprietary trading pilot operated in 2010 and 2011 (the “2015 SEC Settlement”), which had a significant negative impact on our business. In January 2017, we paid $24.5 million to settle the SEC’s investigation into our activity with respect to pre-released American Depositary Receipts (the “2017 SEC Settlement” and together with the 2015 SEC Settlement, the “SEC Settlements”).  Our broker-dealer subsidiaries are also subject to, or involved in, investigations and other proceedings by government agencies and self-regulatory organizations, with respect to which we are cooperating. Our customers’ reaction to the SEC Settlements or the announcement or resolution of other investigations or proceedings may result in reputational and financial harm, which could have a material adverse effect on the Company.

The circumstances relating to the SEC Settlements could subject us to additional actions, including purported class action or other litigation.

In connection with the 2015 SEC Settlement, two putative class action lawsuits were filed and have since been consolidated into a single action in the U.S. District Court for the Southern District of New York against the Company and certain of its current and former executives. In addition, a purported shareholder of the Company filed a shareholder derivative action against eleven current or former officers and directors of the Company in the Supreme Court for the State of New York relating to the 2015 SEC Settlement. The Company is named as a nominal defendant, and the plaintiff purports to seek recovery on its behalf. The complaint generally alleges that the individual defendants breached their fiduciary duties to the Company in connection with the matters that were the subject of the 2015 SEC Settlement. Any further actions or threatened actions based on the circumstances relating to the SEC Settlements, including any governmental investigations or private litigation, and the defense and any related settlement thereof, could have a material adverse effect on the Company’s consolidated financial position or on the results of operations for any particular period, and may result in significant ongoing expenses.

We could be subject to challenges by U.S. and foreign tax authorities that could result in additional taxes and penalties.

We are subject to income and other taxes in each jurisdiction in which we operate. We are also subject to reviews and audits by U.S. and foreign tax authorities. Our determination of our tax obligations in each jurisdiction requires us and our advisers to make judgment calls and estimations. Our determination may differ, even materially, from the judgment of the tax authorities and therefore cause us to incur additional taxes and related interest and penalties, which could impact our financial results.

We may not generate sufficient taxable income in future periods to utilize our loss carryforwards and tax credit carryforwards.

In the Asia Pacific and U.S. regions, we have significant carryforwards for operating losses and tax credits. If we do not generate sufficient future taxable income in these jurisdictions we may not be able to utilize these available carryforwards. In addition, our tax credit carryforwards in the U.S. have a limited period to be utilized due to expiration dates. We have established full valuation allowances in our consolidated financial statements for these deferred tax assets in Asia Pacific and the U.S.

Tax changes, including tax reform in the United States, could affect the Company’s effective tax rate and future profitability.

The Company’s future results could be affected by changes in our effective tax rate as a result of changes in the mix of our overall profitability, changes in tax legislation and the results of audits and examinations of previously filed tax returns.

In December 2017, the current U.S. administration signed into law new comprehensive tax reform legislation called the Tax Cuts and Jobs Act of 2017 (the “Tax Cuts and Jobs Act”), which makes significant changes to the U.S. income tax rules applicable to both individuals and entities, including the Company. The Tax Cuts and Jobs Act includes amendments to the applicability of the corporate alternative minimum tax, reductions in the amount of executive pay that qualifies for deduction and reductions in the U.S. corporate income tax rate. We are currently assessing the impact other provisions of the Tax Cuts and Jobs Act may have on our future profitability, including the global intangible low-taxed income tax provision (“GILTI”) which takes effect in 2018.

Due to the timing of the enactment and the complexity involved in applying the provisions of the Tax Cuts and Jobs Act, we have made reasonable estimates of the effects and recorded provisional amounts in the 2017 consolidated financial statements. As we collect and prepare necessary data and interpret the Tax Cuts and Jobs Act and any additional guidance issued by the U.S. Treasury Department, the IRS, and other standard-setting bodies, additional adjustments to the provisional amounts may be made. Information needed to adjust provisional amounts include the completion of all international 2017 tax returns. These additional adjustments may materially impact the provision for income taxes and effective tax rate in the period in which the adjustments are made. We expect the final accounting for the tax effects of the Tax Cuts and Jobs Act to be completed in 2018.

Inability to protect our intellectual property may result in increased competition, loss of business or other negative results on our business and financial condition.

Our success is dependent, in part, upon our intellectual property. We generally rely upon patents, copyrights, trademarks and trade secrets to establish and protect our rights in our proprietary technology, methods, products and services. We cannot assure that any of the rights granted under any patent, copyright or trademark that we may obtain will protect our competitive advantages. A third party may still try to challenge, invalidate or circumvent the protective mechanisms that we select. In addition, the laws of some foreign countries do not protect our proprietary rights to the same extent as the laws of the U.S., so we cannot predict our ability to properly protect our intellectual property in those jurisdictions. Third parties operating in jurisdictions in which we have not filed for protection may be able to obtain rights in intellectual property that we have protected in the U.S. and other jurisdictions or may be able to misappropriate our intellectual property with impunity.

Additionally, we might not detect the unauthorized use of our intellectual property. If we do detect unauthorized use, enforcing our infringed or misappropriated intellectual property rights may require significant resources. Accordingly, we might choose not to enforce our infringed or misappropriated intellectual property rights, depending on factors like the best use of our limited resources, the value of our infringed or misappropriated intellectual property rights and other outcomes peripherally related to our attempted enforcement.

There can be no assurance that we will be able to protect our intellectual property from improper disclosure or use, or that others will not develop technologies that are similar or superior to our technology without violating our intellectual property. Violations of our intellectual property by third parties could have an adverse effect on our competitiveness and business. In addition, the cost of seeking to enforce our intellectual property rights could have an adverse effect on our financial results.

If we were to unknowingly infringe third party intellectual property or be accused of doing so without merit, we could bear significant costs of defense and litigation, which could impact our financial results.

Under current law, U.S. patent applications remain secret for 18 months and may, depending on how they are prosecuted, remain secret until the issuance of a patent. In light of these factors, it is not always possible to determine in advance whether any of our products or services may infringe the present or future patent rights of others. There can be no guarantee that we will be aware of all patents and trademarks that might pose a risk of infringement by our services. From time to time, we may receive notices from others of claims or potential claims of intellectual property infringement

or we may be called upon to defend our products, customers or licensees against such third-party claims. Responding to these kinds of claims, regardless of merit, could consume valuable time and result in costly litigation that could have a material adverse effect on us. Such claims could also result in our entering into royalty or licensing agreements with the third parties claiming infringement on terms that could have a material impact on our profitability.

If we cannot successfully execute on our strategic initiatives, our business and financial results may be adversely impacted.

We may not be able to implement important strategic initiatives in accordance with our expectations, including that the strategic initiatives could result in additional unanticipated costs, which may result in an adverse impact on our business and financial results. In July 2016, we completed an end-to-end review of our business, clients, people and processes initiated by our Chief Executive Officer.  In connection with these findings, we announced our Strategic Operating Plan to increasingly focus our resources on our core capabilities in execution, liquidity, analytics and workflow solutions, which are our four key service offerings that revolve around the trade implementation cycle. As part of our Strategic Operating Plan, we began pursuing significant investments in technology and people in the second half of 2016 to enhance these key service offerings and sharpen our brand with the expectation that we will meaningfully grow market share, revenues and profitability on a global basis. We expect to continue these investments through the end of 2018.  If we are unable to execute or realize the benefits of these or other strategic initiatives, the strategic initiatives may not result in improvements in future financial performance and could have a material adverse effect on our business, financial condition, cash flows, or results of operations.

Our strategic transactions, including acquisitions and dispositions, may not result in anticipated benefits and may present risks not originally contemplated, which may adversely affect our results of operations and financial condition.

Over the last several years, we have undertaken several strategic transactions, including the acquisition of RFQ‑hub, a multi‑asset platform for global‑listed and OTC financial instruments, as well as the dispositions of our investment research operations. Additionally, in February 2018, we established a joint venture with Option Technology Solutions LLC to form Matrix Holding Group, a derivatives execution and technology business.  We may elect to pursue additional potential strategic transactions in the future , including acquisitions, dispositions, strategic partnerships, joint ventures, restructurings, business combinations and investments.  These transactions entail numerous operational and financial risks, including but not limited to difficulties in valuing acquired businesses, combining personnel and firm cultures, integrating acquired products, services and operations, achieving anticipated synergies that were inherent in our valuation assumptions, exposure to unknown material liabilities, the potential loss of key vendors, clients or employees of acquired companies, incurrence of substantial debt or dilutive issuance of equity securities to pay for acquisitions, higher-than expected acquisition or integration costs, write-downs of assets or impairment charges, increased amortization expenses and decreased earnings, revenue or cash flow from dispositions.  Accordingly, there can be no assurance that we will undertake or successfully complete any transactions of the nature described above, and our failure to execute on any strategic transaction in a satisfactory manner could adversely affect our future results of operations and financial condition.

Our business could be adversely affected by our inability to attract and retain talented employees, including sales, technology and development professionals.

Our business operations require highly specialized knowledge of the financial industry and of technological innovation as it applies to the financial industry. If we are unable to hire or retain the services of talented employees, including executive officers, other key management and sales, technology and development professionals, we would be at a competitive disadvantage. In addition, recruitment and retention of qualified staff could result in substantial additional costs. The loss of the services of one or more of our executive officers or other key professionals or our inability to attract, retain and motivate qualified personnel, could have a material adverse effect on our ability to operate our business.

Operational risks, such as misconduct and errors of our employees or entities with which we do business, could cause us reputational and financial harm.

Employee errors in recording or executing transactions for customers can cause us to enter into transactions that customers may disavow and refuse to settle. Such operational risks expose us to risk of loss, which can be material, until

we detect the errors in question and halt, or where possible, unwind or reverse the transactions. As with any unsettled transaction, adverse movements in the prices of the securities involved in these transactions before we unwind or reverse them can increase this risk. We may incur losses as a result of these transactions that could materially impact our financial results.

In addition to trading errors by our employees, other errors or misconduct by our employees or entities with which we do business could subject us to financial losses or regulatory sanctions and seriously harm our reputation. It is not always possible to prevent employee errors or misconduct and the precautions we take to prevent and detect this activity may not be effective in all cases. Our ability to detect and prevent errors or misconduct by entities with which we do business may be even more limited. Errors could include inadvertently sharing confidential information with unauthorized parties or operational errors from the potential misuse of our products or services.  Misconduct could include, among other things, hiding unauthorized activities from us, improper or unauthorized activities such as activities prohibited by rule or law or improper use of confidential information. Misconduct by our employees or entities with which we do business could result in losses, litigation, regulatory sanctions or other material adverse effects on the Company.

Our business exposes us to litigation risks.

Many aspects of our business involve substantial risks of liability and we are involved in a number of investigations and inquiries that could result in liability. These risks of liability arise from, and could result in claims regarding, among other things, potential delays or failures of trade executions, trade settlement terms and the conduct of other aspects of our business. The defense of claims, even those without merit, could involve significant legal expenses and substantial management time. An adverse resolution of any lawsuit or claim against us could have a material adverse effect on our business, financial condition and results of operations.

The market price of our common stock could be volatile.

The market price of our common stock may be volatile and could be significantly affected by any number of factors like volatility in the broader stock market, changes in analyst earnings estimates, quarterly variations in our results of operations, shifting investor perceptions, a large purchase or sale by a significant stockholder, the announcement of new products or the occurrence of events described in the other risk factors in this Annual Report on Form 10‑K.

There can be no assurance that we will continue to declare cash dividends or repurchase our common stock.

During 2017, we repurchased shares of our common stock under a Board‑authorized repurchase program and the Board also authorized payment of quarterly cash dividends on our common stock. Any determinations to continue to repurchase our common stock or to continue to pay cash dividends on the common stock, in each case at levels consistent with recent practice or at all, will be based on a variety of factors including, among others, market conditions, our financial condition, results of operations, business and capital requirements, price of our common stock in the case of the repurchase programs, competing needs for the use of capital and the continuing determination that the repurchase programs and the declaration of dividends are in the best interests of our stockholders and are in compliance with all laws and agreements applicable to the repurchase and dividend programs. In the event we do not declare a quarterly dividend, or discontinue our share repurchases, our stock price could be adversely affected.

We maintain a facility in El Segundo, California where we occupy approximately 36,200 square feet of office space pursuant to a lease agreement expiring in June 2027. This facility is used primarily for technology research and development and support services.

We have a regional office in Boston, Massachusetts where we lease approximately 36,000 square feet of office space pursuant to a lease expiring in November 2030, of which we sublease approximately 10,200 square feet.

We also have additional regional offices in Chicago, Illinois where we occupy approximately 10,300 square feet pursuant to a lease agreement expiring in October 2018, and in San Francisco, California where we occupy approximately 3,900 square feet pursuant to a lease agreement expiring in October 2018.

Canada

We have an office in Toronto where we occupy approximately 19,900 square feet of office space pursuant to a lease expiring in December 2019.

Europe

In Europe, we have offices in Dublin, London and Paris where we occupy approximately 6,200, 12,200 and 5,000 square feet of office space, respectively. The Dublin space is leased pursuant to an agreement that expires in November 2027, the London space is leased pursuant to an agreement that expires in July 2023 (with a termination option in August 2018), and the space in Paris is leased pursuant to an agreement that expires in May 2024 (with a termination option in May 2019).

Asia Pacific

In Australia we have offices in Melbourne and Sydney, where we occupy approximately 5,700 and 3,400 square feet of office space, respectively, pursuant to leases expiring in May 2020 and June 2020, respectively.

In Hong Kong we occupy approximately 11,000 square feet of office space pursuant to a lease that expires in September 2021. We also lease approximately 1,500 square feet of space for our regional office in Singapore pursuant to a lease that expires in February 2021.