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Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
___________________________________________
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2023
or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number: 001-38860
TRADEWEB MARKETS INC.
(Exact name of registrant as specified in its charter)
___________________________________________
Delaware
83-2456358
(State of other jurisdiction of incorporation or organization)
(I.R.S. Employer Identification No.)
1177 Avenue of the Americas
New York, New York
10036
(Address of principal executive offices)
(Zip Code)
(646) 430-6000
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading Symbol(s)
Name of each exchange on which registered
Class A common stock, par value $0.00001
TW
Nasdaq Global Select Market
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes No
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
Accelerated filer
Non-accelerated filer
Smaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No
Class of Stock
Shares Outstanding as of July 20, 2023
Class A Common Stock, par value $0.00001 per share
114,645,098 
Class B Common Stock, par value $0.00001 per share
96,933,192 
Class C Common Stock, par value $0.00001 per share
 
Class D Common Stock, par value $0.00001 per share
23,080,571 


Table of Contents
TRADEWEB MARKETS INC.
FORM 10-Q FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2023
TABLE OF CONTENTS
Page
Condensed Consolidated Statements of Income for the three and six months ended June 30, 2023 and 2022
Condensed Consolidated Statements of Comprehensive Income for the three and six months ended June 30, 2023 and 2022
Condensed Consolidated Statements of Changes in Equity for the three and six months ended June 30, 2023 and 2022
Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2023 and 2022
2

Table of Contents
INTRODUCTORY NOTE
The financial statements and other disclosures contained in this report include those of Tradeweb Markets Inc., which is the registrant, and those of its consolidating subsidiaries, including Tradeweb Markets LLC, which became the principal operating subsidiary of Tradeweb Markets Inc. on April 4, 2019 in a series of reorganization transactions (the “Reorganization Transactions”) that were completed in connection with Tradeweb Markets Inc.’s initial public offering (the “IPO”), which closed on April 8, 2019.
As a result of the Reorganization Transactions completed in connection with the IPO, Tradeweb Markets Inc. became a holding company whose only material assets consist of its equity interest in Tradeweb Markets LLC and related deferred tax assets. As the sole manager of Tradeweb Markets LLC, Tradeweb Markets Inc. operates and controls all of the business and affairs of Tradeweb Markets LLC and, through Tradeweb Markets LLC and its subsidiaries, conducts its business. As a result of this control, and because Tradeweb Markets Inc. has a substantial financial interest in Tradeweb Markets LLC, Tradeweb Markets Inc. consolidates the financial results of Tradeweb Markets LLC and its subsidiaries.
As used in this Quarterly Report on Form 10-Q, unless the context otherwise requires, references to:
“We,” “us,” “our,” the “Company,” “Tradeweb” and similar references refer: (i) on or prior to the completion of the Reorganization Transactions to Tradeweb Markets LLC, which we refer to as “TWM LLC,” and, unless otherwise stated or the context otherwise requires, all of its subsidiaries and any predecessor entities, and (ii) following the completion of the Reorganization Transactions to Tradeweb Markets Inc., and, unless otherwise stated or the context otherwise requires, TWM LLC and all of its subsidiaries and any predecessor entities.
“Bank Stockholders” refer collectively to entities affiliated with the following clients: Barclays Capital Inc., BofA Securities, Inc. (a subsidiary of Bank of America Corporation), Citigroup Global Markets Inc., Credit Suisse Securities (USA) LLC, Deutsche Bank Securities Inc., Goldman Sachs & Co. LLC, J.P. Morgan Securities LLC, Morgan Stanley & Co. LLC, RBS Securities Inc., UBS Securities LLC and Wells Fargo Securities, LLC, which, prior to the completion of the IPO, collectively held a 46% ownership interest in Tradeweb. As of June 30, 2023, there were no LLC Interests (as defined below) held by Bank Stockholders.
“Continuing LLC Owners” refer collectively to (i) those Original LLC Owners (as defined below), including Refinitiv (as defined below), certain of the Bank Stockholders and members of management, that continued to own LLC Interests after the completion of the IPO and Reorganization Transactions and that received shares of our Class C common stock, shares of our Class D common stock or a combination of both, as the case may be, in connection with the completion of the Reorganization Transactions, (ii) any subsequent transferee of any Original LLC Owner that has executed a joinder agreement to TWM LLC’s limited liability company agreement (the “TWM LLC Agreement”) and (iii) solely with respect to the Tax Receivable Agreement (as defined below), (x) those Original LLC Owners, including certain of the Bank Stockholders, that disposed of all of their LLC Interests for cash in connection with the IPO and (y) any party that has executed a joinder agreement to the Tax Receivable Agreement in accordance with the Tax Receivable Agreement.
“Investor Group” refer to certain investment funds affiliated with The Blackstone Group Inc. (f/k/a The Blackstone Group L.P.), an affiliate of Canada Pension Plan Investment Board, an affiliate of GIC Special Investments Pte. Ltd. and certain co-investors, which prior to the LSEG Transaction (as defined below) collectively held indirectly a 55% ownership interest in Refinitiv.
“LLC Interests” refer to the single class of common membership interests of TWM LLC. LLC Interests, other than those held by Tradeweb Markets Inc., are redeemable or exchangeable in accordance with the TWM LLC Agreement for shares of Class A common stock or Class B common stock, as the case may be, on a one-for-one basis.
“LSEG Transaction” refer to the acquisition of the Refinitiv business by London Stock Exchange Group plc (“LSEG”), in an all share transaction, which closed on January 29, 2021.
“Original LLC Owners” refer to the owners of TWM LLC prior to the Reorganization Transactions.
“Refinitiv,” prior to the LSEG Transaction, refer to Refinitiv Holdings Limited, and unless otherwise stated or the context otherwise requires, all of its direct and indirect subsidiaries, and subsequent to the LSEG Transaction, refer to Refinitiv Parent Limited, and unless otherwise stated or the context otherwise requires, all of its subsidiaries. Refinitiv owns substantially all of the former financial and risk business of Thomson Reuters (as defined below), including, prior to and following the completion of the Reorganization Transactions, an indirect majority ownership interest in Tradeweb, and was controlled by the Investor Group prior to the LSEG Transaction.
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“Refinitiv Transaction” refer to the transaction pursuant to which Refinitiv indirectly acquired on October 1, 2018 substantially all of the financial and risk business of Thomson Reuters and Thomson Reuters indirectly acquired a 45% ownership interest in Refinitiv.
“Thomson Reuters” or “TR” refer to Thomson Reuters Corporation, which prior to the LSEG Transaction indirectly held a 45% ownership interest in Refinitiv.
Numerical figures included in this Quarterly Report on Form 10-Q have been subject to rounding adjustments. Accordingly, numerical figures shown as totals in various tables may not be arithmetic aggregations of the figures that precede them. In addition, we round certain percentages presented in this Quarterly Report on Form 10-Q to the nearest whole number. As a result, figures expressed as percentages in the text may not total 100% or, when aggregated, may not be the arithmetic aggregation of the percentages that precede them.
USE OF NON-GAAP FINANCIAL MEASURES
This Quarterly Report on Form 10-Q contains “non-GAAP financial measures,” which are financial measures that are not calculated and presented in accordance with accounting principles generally accepted in the United States of America (“GAAP”).
The Securities and Exchange Commission (“SEC”) has adopted rules to regulate the use of non-GAAP financial measures in filings with the SEC and in other public disclosures. These rules govern the manner in which non-GAAP financial measures are publicly presented and require, among other things:
a presentation with equal or greater prominence of the most comparable financial measure or measures calculated and presented in accordance with GAAP; and
a statement disclosing the purposes for which the registrant’s management uses the non-GAAP financial measure.
Specifically, we make use of the non-GAAP financial measures “Free Cash Flow,” “Adjusted EBITDA,” “Adjusted EBITDA margin,” “Adjusted EBIT,” “Adjusted EBIT margin,” “Adjusted Net Income” and “Adjusted Diluted EPS,” as well as the change in revenue, Adjusted EBITDA margin and Adjusted EBIT margin on a constant currency basis, in evaluating our historical results and future prospects. For the definition of Free Cash Flow and a reconciliation to cash flow from operating activities, its most directly comparable financial measure presented in accordance with GAAP, see Part I, Item 2. – “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Non-GAAP Financial Measures.” For the definitions of Adjusted EBITDA, Adjusted EBIT and Adjusted Net Income and reconciliations to net income and net income attributable to Tradeweb Markets Inc., as applicable, their most directly comparable financial measures presented in accordance with GAAP, see Part I, Item 2. – “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Non-GAAP Financial Measures.” For the definition of constant currency revenue change, see Part I, Item 2. – “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Results of Operations.” Adjusted EBITDA margin and Adjusted EBIT margin are defined as Adjusted EBITDA and Adjusted EBIT, respectively, divided by revenue for the applicable period. For the definition of constant currency change in Adjusted EBITDA margin and Adjusted EBIT margin, see Part I, Item 2. – “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Non-GAAP Financial Measures.” Adjusted Diluted EPS is defined as Adjusted Net Income divided by the diluted weighted average number of shares of Class A common stock and Class B common stock outstanding for the applicable period (including the effect of potentially dilutive securities determined using the treasury stock method), plus the weighted average number of other participating securities reflected in earnings per share using the two-class method, plus the assumed full exchange of all outstanding LLC Interests held by non-controlling interests for shares of Class A common stock or Class B common stock.
We present Free Cash Flow because we believe it is a useful indicator of liquidity that provides information to management and investors about the amount of cash generated from our core operations after expenditures for capitalized software development costs and furniture, equipment and leasehold improvements.
We present Adjusted EBITDA, Adjusted EBITDA margin, Adjusted EBIT and Adjusted EBIT margin because we believe they assist investors and analysts in comparing our operating performance across reporting periods on a consistent basis by excluding items that we do not believe are indicative of our core operating performance. Management and our board of directors use Adjusted EBITDA, Adjusted EBITDA margin, Adjusted EBIT and Adjusted EBIT margin to assess our financial performance and believe they are helpful in highlighting trends in our core operating performance, while other measures can differ significantly depending on long-term strategic decisions regarding capital structure, the tax jurisdictions in which we operate and capital investments. Further, our executive incentive compensation program is based in part on components of Adjusted EBITDA and Adjusted EBITDA margin.
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We use constant currency measures as supplemental metrics to evaluate our underlying performance between periods by removing the impact of foreign currency fluctuations. We believe that providing certain percentage changes on a constant currency basis provide useful comparisons of our performance and trends between periods.
We use Adjusted Net Income and Adjusted Diluted EPS as supplemental metrics to evaluate our business performance in a way that also considers our ability to generate profit without the impact of certain items. Each of the normal recurring adjustments and other adjustments described in the definition of Adjusted Net Income helps to provide management with a measure of our operating performance over time by removing items that are not related to day-to-day operations or are non-cash expenses.
Free Cash Flow, Adjusted EBITDA, Adjusted EBITDA margin, Adjusted EBIT, Adjusted EBIT margin, Adjusted Net Income, Adjusted Diluted EPS and constant currency measures have limitations as analytical tools, and you should not consider such measures either in isolation or as substitutes for analyzing our results as reported under GAAP. Some of these limitations include the following:
Free Cash Flow, Adjusted EBITDA, Adjusted EBIT, Adjusted Net Income and Adjusted Diluted EPS do not reflect every expenditure, future requirements for capital expenditures or contractual commitments;
Adjusted EBITDA, Adjusted EBIT, Adjusted Net Income and Adjusted Diluted EPS do not reflect changes in our working capital needs;
Adjusted EBITDA and Adjusted EBIT do not reflect any interest expense, or the amounts necessary to service interest or principal payments on any debt obligations;
Adjusted EBITDA and Adjusted EBIT do not reflect income tax expense, which is a necessary element of our costs and ability to operate;
although depreciation and amortization are eliminated in the calculation of Adjusted EBITDA, and the depreciation and amortization related to acquisitions and the Refinitiv Transaction are eliminated in the calculation of Adjusted EBIT, the assets being depreciated and amortized will often have to be replaced in the future, and Adjusted EBITDA and Adjusted EBIT do not reflect any costs of such replacements;
Adjusted EBITDA, Adjusted EBIT, Adjusted Net Income and Adjusted Diluted EPS do not reflect the noncash component of certain employee compensation expense or payroll taxes associated with certain option exercises;
Adjusted EBITDA, Adjusted EBIT, Adjusted Net Income and Adjusted Diluted EPS do not reflect the impact of earnings or charges resulting from matters we consider not to be indicative, on a recurring basis, of our ongoing operations;
Constant currency measures do not reflect the impact of foreign currency fluctuations; and
other companies in our industry may calculate Free Cash Flow, Adjusted EBITDA, Adjusted EBIT, Adjusted Net Income, Adjusted Diluted EPS, constant currency measures or similarly titled measures differently than we do, limiting their usefulness as comparative measures.
We compensate for these limitations by relying primarily on our GAAP results and using Free Cash Flow, Adjusted EBITDA, Adjusted EBIT, Adjusted Net Income, Adjusted Diluted EPS and constant currency measures only as supplemental information.
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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). You can generally identify forward-looking statements by our use of forward-looking terminology such as “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “might,” “plan,” “potential,” “predict,” “projection,” “seek,” “should,” “will” or “would,” or the negative thereof or other variations thereon or comparable terminology. In particular, statements about the markets in which we operate, including our expectations about market trends, our market opportunity and the growth of our various markets, our expansion into new markets, any pending acquisitions or other strategic transactions, any potential tax savings we may realize as a result of our organizational structure, our dividend policy, our share repurchase program and our expectations, beliefs, plans, strategies, objectives, prospects or assumptions regarding future events, our performance or otherwise, contained in this Quarterly Report on Form 10-Q are forward-looking statements.
We have based these forward-looking statements on our current expectations, assumptions, estimates and projections. While we believe these expectations, assumptions, estimates and projections are reasonable, such forward-looking statements are only predictions and involve known and unknown risks and uncertainties, many of which are beyond our control. These and other important factors may cause our actual results, performance or achievements to differ materially from those expressed or implied by these forward-looking statements, or could affect our stock price.
Some of the factors that could cause actual results to differ materially from those expressed or implied by the forward-looking statements include:
changes in economic, political, social and market conditions and the impact of these changes on trading volumes;
our failure to compete successfully;
our failure to adapt our business effectively to keep pace with industry changes;
consolidation and concentration in the financial services industry;
our dependence on dealer clients;
design defects, errors, failures or delays with our platforms or solutions;
our dependence on third parties for certain market data and certain key functions;
our inability to achieve our environmental, social and governance goals;
our ability to implement our business strategies profitably;
our ability to successfully integrate any acquisition or to realize benefits from any strategic alliances, partnerships or joint ventures;
our inability to maintain and grow the capacity of our trading platforms, systems and infrastructure;
systems failures, interruptions, delays in services, cybersecurity incidents, catastrophic events and any resulting interruptions;
inadequate protection of our intellectual property;
extensive regulation of our industry;
our ability to retain the services of our senior management team;
limitations on operating our business and incurring additional indebtedness as a result of covenant restrictions under our $500.0 million senior secured revolving credit facility (the “Revolving Credit Facility”) with Citibank, N.A., as administrative agent and collateral agent, and the other lenders party thereto;
our dependence on distributions from TWM LLC to fund our expected dividend payments and to pay our taxes and expenses, including payments under the tax receivable agreement (the “Tax Receivable Agreement”) entered into in connection with the IPO;
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our ability to realize any benefit from our organizational structure;
Refinitiv’s, and indirectly LSEG’s, control of us and our status as a controlled company; and
other risks and uncertainties, including those listed under Part I, Item 1A. “Risk Factors” of our Annual Report on Form 10-K for the year ended December 31, 2022 (the “2022 Form 10-K”), filed with the Securities and Exchange Commission (“SEC”) and in other filings we may make from time to time with the SEC.
Given these risks and uncertainties, you are cautioned not to place undue reliance on such forward-looking statements. The forward-looking statements contained in this Quarterly Report on Form 10-Q are not guarantees of future events or performance and future events, our actual results of operations, financial condition or liquidity, and the development of the industry and markets in which we operate, may differ materially from the forward-looking statements contained in this Quarterly Report on Form 10-Q. In addition, even if future events, our results of operations, financial condition or liquidity, and events in the industry and markets in which we operate, are consistent with the forward-looking statements contained in this Quarterly Report on Form 10-Q, they may not be predictive of events, results or developments in future periods.
Any forward-looking statement that we make in this Quarterly Report on Form 10-Q speaks only as of the date of such statement. Except as required by law, we do not undertake any obligation to update or revise, or to publicly announce any update or revision to, any of the forward-looking statements, whether as a result of new information, future events or otherwise, after the date of this Quarterly Report on Form 10-Q.
Investors and others should note that we announce material financial and operational information using our investor relations website, press releases, SEC filings and public conference calls and webcasts. Information about Tradeweb, our business and our results of operations may also be announced by posts on Tradeweb’s accounts on the following social media channels: Instagram, LinkedIn and Twitter. The information that we post through these social media channels may be deemed material. As a result, we encourage investors, the media and others interested in Tradeweb to monitor these social media channels in addition to following our investor relations website, press releases, SEC filings and public conference calls and webcasts. These social media channels may be updated from time to time on our investor relations website.
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PART I — FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Tradeweb Markets Inc. and Subsidiaries
Condensed Consolidated Statements of Financial Condition
(in thousands, except share and per share amounts)
(Unaudited)
June 30,December 31,
20232022
Assets
Cash and cash equivalents$1,395,901 $1,257,229 
Restricted cash1,500 1,000 
Receivable from brokers and dealers and clearing organizations128,015 11,632 
Deposits with clearing organizations23,942 23,906 
Accounts receivable, net of allowance for credit losses of $177 and $129 at June 30, 2023 and December 31, 2022, respectively
163,219 142,676 
Furniture, equipment, purchased software and leasehold improvements, net of accumulated depreciation and amortization35,823 37,413 
Lease right-of-use assets20,427 24,933 
Software development costs, net of accumulated amortization135,767 141,833 
Goodwill2,780,259 2,780,259 
Intangible assets, net of accumulated amortization1,019,219 1,072,818 
Receivable and due from affiliates4,441 2,728 
Deferred tax asset708,947 689,442 
Other assets73,041 74,262 
Total assets$6,490,501 $6,260,131 
Liabilities and Equity
Liabilities
Payable to brokers and dealers and clearing organizations$128,009 $11,264 
Accrued compensation84,878 150,884 
Deferred revenue27,412 22,827 
Accounts payable, accrued expenses and other liabilities40,914 46,690 
Lease liabilities23,287 27,943 
Payable and due to affiliates1,744 7,232 
Deferred tax liability18,913 21,251 
Tax receivable agreement liability447,976 425,724 
Total liabilities773,133 713,815 
Commitments and contingencies (Note 13)


Equity
Preferred stock, $0.00001 par value; 250,000,000 shares authorized; none issued or outstanding
  
Class A common stock, $0.00001 par value; 1,000,000,000 shares authorized; 114,668,017 and 110,746,606 shares issued and outstanding as of June 30, 2023 and December 31, 2022, respectively
1 1 
Class B common stock, $0.00001 par value; 450,000,000 shares authorized; 96,933,192 and 96,933,192 shares issued and outstanding as of June 30, 2023 and December 31, 2022, respectively
1 1 
Class C common stock, $0.00001 par value; 350,000,000 shares authorized; none and 3,251,177 shares issued and outstanding as of June 30, 2023 and December 31, 2022, respectively
  
Class D common stock, $0.00001 par value; 300,000,000 shares authorized; 23,080,571 and 23,092,704 shares issued and outstanding as of June 30, 2023 and December 31, 2022, respectively
  
Additional paid-in capital4,693,795 4,577,270 
Accumulated other comprehensive income (loss)(6,818)(10,113)
Retained earnings495,481 386,632 
Total stockholders’ equity attributable to Tradeweb Markets Inc.5,182,460 4,953,791 
Non-controlling interests534,908 592,525 
Total equity5,717,368 5,546,316 
Total liabilities and equity$6,490,501 $6,260,131 
The accompanying notes are an integral part of these condensed consolidated financial statements.
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Tradeweb Markets Inc. and Subsidiaries
Condensed Consolidated Statements of Income
(in thousands, except share and per share amounts)
(Unaudited)
Three Months EndedSix Months Ended
June 30,June 30,
2023202220232022
Revenues
Transaction fees and commissions$246,461 $237,669 $513,059 $489,474 
Subscription fees45,748 41,540 90,122 82,995 
Refinitiv market data fees15,461 15,426 31,055 30,984 
Other2,943 2,503 5,626 5,171 
Total revenue310,613 297,138 639,862 608,624 
Expenses
Employee compensation and benefits103,924 109,890 218,417 227,881 
Depreciation and amortization45,887 44,770 91,291 89,220 
Technology and communications18,701 16,034 36,268 31,810 
General and administrative11,072 7,601 24,992 17,914 
Professional fees10,666 8,575 21,842 16,432 
Occupancy4,028 3,661 8,151 7,158 
Total expenses194,278 190,531 400,961 390,415 
Operating income116,335 106,607 238,901 218,209 
Net interest income (expense)15,109 541 27,600 94 
Other income (loss), net(456) (115) 
Income before taxes130,988 107,148 266,386 218,303 
Provision for income taxes(29,049)(25,548)(62,254)(39,258)
Net income101,939 81,600 204,132 179,045 
Less: Net income attributable to non-controlling interests12,857 13,256 27,194 27,736 
Net income attributable to Tradeweb Markets Inc.$89,082 $68,344 $176,938 $151,309 
Earnings per share attributable to Tradeweb Markets Inc. Class A and B common stockholders:
Basic$0.42 $0.33 $0.84 $0.74 
Diluted$0.42 $0.33 $0.83 $0.73 
Weighted average shares outstanding:
Basic211,569,728204,501,035209,847,153204,282,406
Diluted213,156,753207,272,675211,659,814207,371,372
The accompanying notes are an integral part of these condensed consolidated financial statements.
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Tradeweb Markets Inc. and Subsidiaries
Condensed Consolidated Statements of Comprehensive Income
(in thousands)
(Unaudited)
Three Months EndedSix Months Ended
June 30,June 30,
2023202220232022
Net income$101,939 $81,600 $204,132 $179,045 
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustments, with no tax benefit for each of the three and six months ended June 30, 2023 and 2022
1,184 (9,677)3,833 (13,775)
Other comprehensive income (loss), net of tax1,184 (9,677)3,833 (13,775)
Comprehensive income103,123 71,923 207,965 165,270 
Less: Net income attributable to non-controlling interests12,857 13,256 27,194 27,736 
Less: Foreign currency translation adjustments attributable to non-controlling interests117 (1,237)414 (1,767)
Comprehensive income attributable to Tradeweb Markets Inc.$90,149 $59,904 $180,357 $139,301 
The accompanying notes are an integral part of these condensed consolidated financial statements.
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Tradeweb Markets Inc. and Subsidiaries
Condensed Consolidated Statements of Changes in Equity
(in thousands, except share and per share amounts)
(Unaudited)
Tradeweb Markets Inc. Stockholders’ Equity
Par Value
Class A
Common Stock
Class B
Common Stock
Class C
Common Stock
Class D
Common Stock
Additional
Paid-In
Capital
Accumulated
Other
Comprehensive
Income (Loss)
Retained
Earnings
Non-
Controlling
Interests
Total
Equity
Balance at December 31, 2022$1 $1 $ $ $4,577,270 $(10,113)$386,632 $592,525 $5,546,316 
Issuance of common stock from equity incentive plans— — — — 6,320 — — — 6,320 
Share repurchases pursuant to share repurchase programs— — — — — — (22,706)— (22,706)
Tax receivable agreement liability and deferred taxes arising from LLC Interest ownership exchanges and the issuance of common stock from equity incentive plans— — — — 15,082 — — — 15,082 
Adjustments to non-controlling interests— — — — 6,910 (4)— (6,906) 
Distributions to non-controlling interests— — — — — — — (2,283)(2,283)
Dividends ($0.09 per share)
— — — — — — (18,733)— (18,733)
Stock-based compensation expense under the PSU Plan— — — — 410 — — — 410 
Stock-based compensation expense under the PRSU Plan— — — — 4,273 — — — 4,273 
Stock-based compensation expense under the RSU Plan— — — — 6,810 — — — 6,810 
Stock-based compensation expense under the Option Plan— — — — 412 — — — 412 
Payroll taxes paid for stock-based compensation— — — — (39,878)— — — (39,878)
Net income— — — — — — 87,856 14,337 102,193 
Foreign currency translation adjustments— — — — — 2,352 — 297 2,649 
Balance at March 31, 2023$1 $1 $ $ $4,577,609 $(7,765)$433,049 $597,970 $5,600,865 
Issuance of common stock from equity incentive plans— — — — 1,262 — — — 1,262 
Share repurchases pursuant to the Share Repurchase Program— — — — — — (7,602)— (7,602)
Tax receivable agreement liability and deferred taxes arising from LLC Interest ownership exchanges and the issuance of common stock from equity incentive plans— — — — 27,827 — — — 27,827 
Adjustments to non-controlling interests— — — — 72,870 (120)— (72,750) 
Distributions to non-controlling interests— — — — — — — (3,286)(3,286)
Dividends ($0.09 per share)
— — — — — — (19,048)— (19,048)
Stock-based compensation expense under the PSU Plan— — — — 2,194 — — — 2,194 
Stock-based compensation expense under the PRSU Plan— — — — 5,912 — — — 5,912 
Stock-based compensation expense under the RSU Plan— — — — 7,709 — — — 7,709 
Stock-based compensation expense under the Option Plan— — — — 282 — — — 282 
Payroll taxes paid for stock-based compensation— — — — (1,870)— — — (1,870)
Net income— — — — — — 89,082 12,857 101,939 
Foreign currency translation adjustments— — — — — 1,067 — 117 1,184 
Balance at June 30, 2023$1 $1 $ $ $4,693,795 $(6,818)$495,481 $534,908 $5,717,368 
The accompanying notes are an integral part of these condensed consolidated financial statements.
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Tradeweb Markets Inc. and Subsidiaries
Condensed Consolidated Statements of Changes in Equity – (Continued)
(in thousands, except share and per share amounts)
(Unaudited)
Tradeweb Markets Inc. Stockholders’ Equity
Par Value
Class A
Common Stock
Class B
Common Stock
Class C
Common Stock
Class D
Common Stock
Additional
Paid-In
Capital
Accumulated
Other
Comprehensive
Income (Loss)
Retained
Earnings
Non-
Controlling
Interests
Total
Equity
Balance at December 31, 2021$1 $1 $ $ $4,401,366 $1,604 $242,623 $663,348 $5,308,943 
Issuance of common stock from equity incentive plans— — — — 692 — — — 692 
Share repurchases pursuant to share repurchase programs— — — — — — (47,323)— (47,323)
Tax receivable agreement liability and deferred taxes arising from LLC Interest ownership exchanges and the issuance of common stock from equity incentive plans— — — — 38,676 — — — 38,676 
Adjustments to non-controlling interests— — — — 30,005 — — (30,005) 
Distributions to non-controlling interests— — — — — — — (2,178)(2,178)
Dividends ($0.08 per share)
— — — — — — (16,350)— (16,350)
Stock-based compensation expense under the PRSU Plan— — — — 6,351 — — — 6,351 
Stock-based compensation expense under the RSU Plan— — — — 6,102 — — — 6,102 
Stock-based compensation expense under the Option Plan— — — — 1,229 — — — 1,229 
Payroll taxes paid for stock-based compensation— — — — (95,758)— — — (95,758)
Net income— — — — — — 82,965 14,480 97,445 
Foreign currency translation adjustments— — — — — (3,568)— (530)(4,098)
Balance at March 31, 2022$1 $1 $ $ $4,388,663 $(1,964)$261,915 $645,115 $5,293,731 
Issuance of common stock from equity incentive plans— — — — 6,924 — — — 6,924 
Share repurchases pursuant to the Share Repurchase Program— — — — — — (9,000)— (9,000)
Tax receivable agreement liability and deferred taxes arising from LLC Interest ownership exchanges and the issuance of common stock from equity incentive plans
— — — — 7,449 — — — 7,449 
Adjustments to non-controlling interests— — — — (1,300)— — 1,300  
Distributions to non-controlling interests— — — — — — — (2,568)(2,568)
Dividends ($0.08 per share)
— — — — — — (16,360)— (16,360)
Stock-based compensation expense under the PRSU Plan— — — — 11,140 — — — 11,140 
Stock-based compensation expense under the RSU Plan— — — — 9,459 — — — 9,459 
Stock-based compensation expense under the Option Plan— — — — 288 — — — 288 
Payroll taxes paid for stock-based compensation— — — — (2,218)— — — (2,218)
Net income— — — — — — 68,344 13,256 81,600 
Foreign currency translation adjustments— — — — — (8,440)— (1,237)(9,677)
Balance at June 30, 2022$1 $1 $ $ $4,420,405 $(10,404)$304,899 $655,866 $5,370,768 
The accompanying notes are an integral part of these condensed consolidated financial statements.
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Tradeweb Markets Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(in thousands)
(Unaudited)
Six Months Ended
June 30,
20232022
Cash flows from operating activities
Net income$204,132 $179,045 
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation and amortization91,291 89,220 
Stock-based compensation expense27,323 34,675 
Deferred taxes49,264 30,551 
Other (income) loss, net115  
(Increase) decrease in operating assets:
Receivable from/payable to brokers and dealers and clearing organizations, net362 (3)
Deposits with clearing organizations50 (5,666)
Accounts receivable(18,239)(30,638)
Receivable and due from affiliates/payable and due to affiliates, net(5,277)(3,928)
Other assets1,334 (8,063)
Increase (decrease) in operating liabilities:
Accrued compensation(66,974)(61,919)
Deferred revenue4,555 (966)
Accounts payable, accrued expenses and other liabilities(3,997)1,007 
Net cash provided by operating activities283,939 223,315 
Cash flows from investing activities
Cash paid for foreign currency call option(2,389) 
Purchases of furniture, equipment, software and leasehold improvements(11,166)(14,823)
Capitalized software development costs(20,505)(18,264)
Net cash used in investing activities(34,060)(33,087)
Cash flows from financing activities
Share repurchases pursuant to share repurchase programs(30,056)(56,323)
Proceeds from stock-based compensation exercises7,582 7,616 
Dividends(37,781)(32,710)
Distributions to non-controlling interests(5,569)(4,746)
Payroll taxes paid for stock-based compensation(41,748)(97,976)
Payments on tax receivable agreement liability(5,724)(8,995)
Net cash used in financing activities(113,296)(193,134)
Effect of exchange rate changes on cash, cash equivalents and restricted cash2,589 (9,423)
Net increase (decrease) in cash, cash equivalents and restricted cash139,172 (12,329)
Cash, cash equivalents and restricted cash
Beginning of period1,258,229 973,048 
End of period$1,397,401 $960,719 
The accompanying notes are an integral part of these condensed consolidated financial statements.









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Tradeweb Markets Inc. and Subsidiaries
Consolidated Statements of Cash Flows - (Continued)
(in thousands)
(Unaudited)

Six Months Ended
June 30,
20232022
Supplemental disclosure of cash flow information
Income taxes paid, net of (refunds)$19,026 $5,326 
Non-cash investing and financing activities
Furniture, equipment, software and leasehold improvement additions included in accounts payable$1,203 $ 
Unsettled share repurchases included in other liabilities$252 $ 
Items arising from LLC Interest ownership changes:
Establishment of liabilities under tax receivable agreement$27,976 $5,699 
Deferred tax asset$70,886 $51,824 
June 30,December 31,
Reconciliation of cash, cash equivalents and restricted cash as shown on the statements of financial condition:20232022
Cash and cash equivalents$1,395,901 $1,257,229 
Restricted cash1,500 1,000 
Cash, cash equivalents and restricted cash shown in the statement of cash flows$1,397,401 $1,258,229 

The accompanying notes are an integral part of these condensed consolidated financial statements.
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Notes to Condensed Consolidated Financial Statements
(Unaudited)
Page
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Tradeweb Markets Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(Unaudited)
1.    Organization
Tradeweb Markets Inc. (the “Corporation”) was incorporated as a Delaware corporation on November 7, 2018 to carry on the business of Tradeweb Markets LLC (“TWM LLC”) following the completion of a series of reorganization transactions on April 4, 2019 (the “Reorganization Transactions”), in connection with Tradeweb Markets Inc.’s initial public offering (the “IPO”), which closed on April 8, 2019. Following the Reorganization Transactions, Refinitiv (as defined below) owned an indirect majority ownership interest in the Company (as defined below).
On January 29, 2021, London Stock Exchange Group plc (“LSEG”) completed its acquisition of the Refinitiv business from a consortium, including certain investment funds affiliated with The Blackstone Group Inc. (f/k/a The Blackstone Group L.P.) (“Blackstone”) as well as Thomson Reuters Corporation (“TR”), in an all share transaction (the “LSEG Transaction”).
In connection with the LSEG Transaction, the Corporation became a consolidating subsidiary of LSEG. Prior to the LSEG Transaction, the Corporation was a consolidating subsidiary of BCP York Holdings (“BCP”), a company owned by certain investment funds affiliated with Blackstone, through BCP’s previous majority ownership interest in Refinitiv. As used herein, “Refinitiv,” prior to the LSEG Transaction, means Refinitiv Holdings Limited, and unless otherwise stated or the context otherwise requires, all of its direct and indirect subsidiaries, and subsequent to the LSEG Transaction, refers to Refinitiv Parent Limited, and unless otherwise stated or the context otherwise requires, all of its subsidiaries. Refinitiv owns substantially all of the former financial and risk business of Thomson Reuters (as defined below), including, prior to and following the completion of the Reorganization Transactions, an indirect majority ownership interest in the Company.
The Corporation is a holding company whose principal asset is LLC Interests (as defined below) of TWM LLC. As the sole manager of TWM LLC, the Corporation operates and controls all of the business and affairs of TWM LLC and, through TWM LLC and its subsidiaries, conducts the Corporation’s business. As a result of this control, and because the Corporation has a substantial financial interest in TWM LLC, the Corporation consolidates the financial results of TWM LLC and reports a non-controlling interest in the Corporation’s condensed consolidated financial statements. As of June 30, 2023, Tradeweb Markets Inc. owned 90.2% of TWM LLC and the non-controlling interest holders owned the remaining 9.8% of TWM LLC. As of December 31, 2022, Tradeweb Markets Inc. owned 88.7% of TWM LLC and the non-controlling interest holders owned the remaining 11.3% of TWM LLC. 
Unless the context otherwise requires, references to the “Company” refer to Tradeweb Markets Inc. and its consolidated subsidiaries, including TWM LLC, following the completion of the Reorganization Transactions, and TWM LLC and its consolidated subsidiaries prior to the completion of the Reorganization Transactions.
The Company is a leader in building and operating electronic marketplaces for a global network of clients across the institutional, wholesale and retail client sectors. The Company’s principal subsidiaries include:
Tradeweb LLC (“TWL”), a registered broker-dealer under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), a member of the Financial Industry Regulatory Authority (“FINRA”), a member of the Municipal Securities Rulemaking Board (“MSRB”), a registered independent introducing broker with the Commodities Future Trading Commission (“CFTC”) and a member of the National Futures Association (“NFA”).
Dealerweb Inc. (“DW”) (formerly known as Hilliard Farber & Co., Inc.), a registered broker-dealer under the Exchange Act and a member of FINRA and MSRB. DW is also registered as an introducing broker with the CFTC and a member of the NFA.
Tradeweb Direct LLC (“TWD”) (formerly known as BondDesk Trading LLC), a registered broker-dealer under the Exchange Act and a member of FINRA and MSRB.
Tradeweb Europe Limited (“TEL”), a MiFID Investment Firm regulated by the Financial Conduct Authority (the “FCA”) in the UK and certain other global regulators and that maintains branches in Asia.
TW SEF LLC (“TW SEF”), a Swap Execution Facility (“SEF”) regulated by the CFTC and certain other global regulators.
DW SEF LLC (“DW SEF”), a SEF regulated by the CFTC and certain other global regulators.
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Tradeweb Japan K.K. (“TWJ”), a security house regulated by the Japanese Financial Services Agency (“JFSA”) and the Japan Securities Dealers Association (“JSDA”).
Tradeweb EU B.V. (“TWEU”), a MiFID Investment Firm regulated by the Netherlands Authority for the Financial Markets (“AFM”), the De Nederlandsche Bank (“DNB”) and certain other global regulators and that maintains a branch in France.
Tradeweb Execution Services Limited (“TESL”), an Investment Firm (“BIPRU Firm”) regulated by the FCA in the UK.
Tradeweb Commercial Information Consulting (Shanghai) Co., Ltd. a wholly-owned foreign enterprise (WOFE) for the purpose of providing consulting and marketing activities in China. The offshore electronic trading platform is recognized by the People’s Bank of China for the provision of Bond Connect and CIBM Direct.
Tradeweb Execution Services B.V. (“TESBV”), a MiFID investment firm authorized and regulated by the AFM, with permission to trade on a matched principal basis.
In June 2021, the Company acquired Nasdaq’s U.S. fixed income electronic trading platform, formerly known as eSpeed (the “NFI Acquisition”), which is a fully executable central limit order book (CLOB) for electronic trading in on-the-run (OTR) U.S. government bonds. The NFI Acquisition included the acquisition of Execution Access, LLC, (“EA”), a registered broker-dealer under the Exchange Act and a member of FINRA. In November 2022, EA merged with and into DW with DW being the surviving entity.
A majority interest of Refinitiv (formerly the Thomson Reuters Financial & Risk Business) was acquired by BCP on October 1, 2018 (the “Refinitiv Transaction”) from TR. The Refinitiv Transaction resulted in a new basis of accounting for certain of the Company’s assets and liabilities beginning on October 1, 2018. See Note 2 – Significant Accounting Policies for a description of pushdown accounting applied as a result of the Refinitiv Transaction.
In connection with the Reorganization Transactions, TWM LLC’s limited liability company agreement (the “TWM LLC Agreement”) was amended and restated to, among other things, (i) provide for a new single class of common membership interests in TWM LLC (the “LLC Interests”), (ii) exchange all of the then existing membership interests in TWM LLC for LLC Interests and (iii) appoint the Corporation as the sole manager of TWM LLC. LLC Interests, other than those held by the Corporation, are redeemable or exchangeable in accordance with the TWM LLC Agreement for shares of Class A common stock, par value $0.00001 per share, of the Corporation (the “Class A common stock”) or Class B common stock, par value $0.00001 per share, of the Corporation (the “Class B common stock”), as the case may be, on a one-for-one basis.
As used herein, references to “Continuing LLC Owners” refer collectively to (i) those owners of TWM LLC prior to the Reorganization Transactions (the “Original LLC Owners”), including an indirect subsidiary of Refinitiv, certain investment and commercial banks (collectively, the “Bank Stockholders”), and members of management, that continued to own LLC Interests after the completion of the IPO and Reorganization Transactions and that received shares of Class C common stock, par value $0.00001 per share, of the Corporation (the “Class C common stock”), shares of Class D common stock, par value $0.00001 per share, of the Corporation (the “Class D common stock”) or a combination of both, as the case may be, in connection with the completion of the Reorganization Transactions, (ii) any subsequent transferee of any Original LLC Owner that has executed a joinder agreement to the TWM LLC Agreement and (iii) solely with respect to the Tax Receivable Agreement (as defined in Note 6 – Tax Receivable Agreement), (x) those Original LLC Owners, including certain of the Bank Stockholders, that disposed of all of their LLC Interests for cash in connection with the IPO and (y) any party that has executed a joinder agreement to the Tax Receivable Agreement in accordance with the Tax Receivable Agreement.
As of June 30, 2023:
The public investors collectively owned 114,668,017 shares of Class A common stock, representing 8.7% of the combined voting power of Tradeweb Markets Inc.’s issued and outstanding common stock and indirectly, through Tradeweb Markets Inc., owned 48.9% of the economic interest in TWM LLC;
Refinitiv collectively owned 96,933,192 shares of Class B common stock and 22,988,329 shares of Class D common stock, representing 91.2% of the combined voting power of Tradeweb Markets Inc.’s issued and outstanding common stock and directly and indirectly, through Tradeweb Markets Inc., owned 51.1% of the economic interest in TWM LLC; and
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Other stockholders that continued to own LLC Interests also collectively owned 92,242 shares of Class D common stock, representing 0.1% of the combined voting power of Tradeweb Markets Inc.’s issued and outstanding common stock. Collectively, these stockholders directly owned less than 0.1% of the economic interest in TWM LLC.
In addition, the Company’s basic and diluted earnings per share calculations for the three and six months ended June 30, 2023 were impacted by 241,963 and 266,790, respectively, of weighted average shares resulting from unvested restricted stock units and unsettled vested performance-based restricted stock units that were considered participating securities for purposes of calculating earnings per share in accordance with the two-class method. The Company’s diluted earnings per share calculations for the three and six months ended June 30, 2023 also include 1,587,025 and 1,812,661, respectively, of weighted average shares resulting from the dilutive effect of its equity incentive plans. See Note 14 – Earnings Per Share for additional details.
2.    Significant Accounting Policies
The following is a summary of significant accounting policies:
Basis of Presentation
The condensed consolidated financial statements include the accounts of the Company and its subsidiaries. All intercompany transactions and balances have been eliminated in consolidation. As discussed in Note 1 – Organization, as a result of the Reorganization Transactions, Tradeweb Markets Inc. consolidates TWM LLC and its subsidiaries and TWM LLC is considered to be the predecessor to Tradeweb Markets Inc. for financial reporting purposes. Tradeweb Markets Inc. had no business transactions or activities and no substantial assets or liabilities prior to the Reorganization Transactions. The condensed consolidated financial statements represent the financial condition and results of operations of the Company and report a non-controlling interest related to the LLC Interests held by Continuing LLC Owners.
These condensed consolidated financial statements are unaudited and should be read in conjunction with the audited consolidated financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022. The consolidated financial information as of December 31, 2022 has been derived from audited financial statements not included herein. These unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and the rules and regulations of the U.S. Securities and Exchange Commission (“SEC”) with respect to interim financial reporting and Form 10-Q. In accordance with such rules and regulations, certain disclosures that are normally included in annual financial statements have been omitted. These unaudited condensed consolidated financial statements reflect all normal and recurring adjustments that are, in the opinion of management, necessary for a fair statement of the results for the interim periods presented. Operating results for interim periods are not necessarily indicative of the results that may be expected for the full year.
Use of Estimates
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates and the difference may be material to the condensed consolidated financial statements.
Reclassifications
Certain reclassifications have been made to the December 31, 2022 consolidated statement of financial condition, and related financial information, to conform to the current period presentation. These primarily include reclassifying approximately $2.7 million of related party balances from other assets to receivable and due from affiliates and $5.8 million of related party balances from accounts payable, accrued expenses and other liabilities to payable and due to affiliates. These reclassifications had no impact on total assets, total liabilities or total equity on the consolidated statement of financial condition, nor did they have any impact on the consolidated statements of income, comprehensive income, changes in equity or cash flows.
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Business Combinations
Business combinations are accounted for under the purchase method of accounting pursuant to Accounting Standards Codification (“ASC”) 805, Business Combinations (“ASC 805”). The total cost of an acquisition is allocated to the underlying net assets based on their respective estimated fair values. The excess of the purchase price over the estimated fair values of the net assets acquired is recorded as goodwill. The fair value of assets acquired and liabilities assumed is determined based on assumptions that reasonable market participants would use in the principal (or most advantageous) market for the asset or liability. Determining the fair value of certain assets acquired and liabilities assumed is judgmental in nature and often involves the use of significant estimates and assumptions, including assumptions with respect to future cash flows, discount rates, growth rates, customer attrition rates and asset lives.
Transaction costs incurred to effect a business combination are expensed as incurred and are included as a component of professional fees in the condensed consolidated statements of income.
Pushdown Accounting
In connection with the Refinitiv Transaction, a majority interest of Refinitiv was acquired by BCP on October 1, 2018 from TR. The Refinitiv Transaction was accounted for by Refinitiv in accordance with the acquisition method of accounting pursuant to ASC 805, and pushdown accounting was applied to Refinitiv to record the fair value of the assets and liabilities of Refinitiv as of October 1, 2018, the date of the Refinitiv Transaction. The Company, as a consolidating subsidiary of Refinitiv, also accounted for the Refinitiv Transaction using pushdown accounting which resulted in a new fair value basis of accounting for certain of the Company’s assets and liabilities beginning on October 1, 2018. Under the pushdown accounting applied, the excess of the fair value of the Company above the fair value accounting basis of the net assets and liabilities of the Company as of October 1, 2018 was recorded as goodwill. The fair value of assets acquired and liabilities assumed was determined based on assumptions that reasonable market participants would use in the principal (or most advantageous) market for the asset or liability. The adjusted valuations primarily affected the values of the Company’s long-lived and indefinite-lived intangible assets, including software development costs.
Cash and Cash Equivalents
Cash and cash equivalents consists of cash and highly liquid investments (such as short-term money market instruments) with remaining maturities at the time of purchase of three months or less.
Allowance for Credit Losses
The Company continually monitors collections and payments from its clients and maintains an allowance for credit losses. The allowance for credit losses is based on an estimate of the amount of potential credit losses in existing accounts receivable, as determined from a review of aging schedules, past due balances, historical collection experience and other specific account data. Careful analysis of the financial condition of the Company’s counterparties is also performed.
Additions to the allowance for credit losses are charged to credit loss expense, which is included in general and administrative expenses in the condensed consolidated statements of income. Aged balances that are determined to be uncollectible are written off against the allowance for credit losses. See Note 12 – Credit Risk for additional information.
Receivable from and Payable to Brokers and Dealers and Clearing Organizations
Receivable from and payable to brokers and dealers and clearing organizations consists of proceeds from transactions executed on the Company’s wholesale platform which failed to settle due to the inability of a transaction party to deliver or receive the transacted security. These securities transactions are generally collateralized by those securities. Until the failed transaction settles, a receivable from (and a matching payable to) brokers and dealers and clearing organizations is recognized for the proceeds from the unsettled transaction.
Deposits with Clearing Organizations
Deposits with clearing organizations are comprised of cash deposits.
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Furniture, Equipment, Purchased Software and Leasehold Improvements
Furniture, equipment, purchased software and leasehold improvements are carried at cost less accumulated depreciation. Depreciation for furniture, equipment and purchased software is computed on a straight-line basis over the estimated useful lives of the related assets, ranging from three to seven years. Leasehold improvements are amortized over the lesser of the estimated useful lives of the leasehold improvements or the remaining term of the lease for office space.
Furniture, equipment, purchased software and leasehold improvements are tested for impairment whenever events or changes in circumstances suggest that an asset’s carrying value may not be fully recoverable.
As of June 30, 2023 and December 31, 2022, accumulated depreciation related to furniture, equipment, purchased software and leasehold improvements totaled $84.7 million and $73.8 million, respectively. Depreciation expense for furniture, equipment, purchased software and leasehold improvements was $5.3 million and $4.9 million for the three months ended June 30, 2023 and 2022, respectively, and $10.5 million and $9.6 million for the six months ended June 30, 2023 and 2022, respectively.
Software Development Costs
The Company capitalizes costs associated with the development of internal use software at the point at which the conceptual formulation, design and testing of possible software project alternatives have been completed. The Company capitalizes employee compensation and related benefits and third party consulting costs incurred during the application development stage which directly contribute to such development. Such costs are amortized on a straight-line basis over three years. Software development costs acquired as part of the NFI Acquisition were amortized over one year. Costs capitalized as part of the Refinitiv Transaction pushdown accounting allocation are amortized over nine years. The Company reviews the amounts capitalized for impairment whenever events or changes in circumstances indicate that the carrying amounts of the assets may not be fully recoverable, or that their useful lives are shorter than originally expected. Non-capitalized software costs and routine maintenance costs are expensed as incurred.
As of June 30, 2023 and December 31, 2022, accumulated amortization related to software development costs totaled $193.9 million and $166.6 million, respectively. Amortization expense for software development costs was $13.8 million and $13.0 million for the three months ended June 30, 2023 and 2022, respectively, and $27.2 million and $26.0 million for the six months ended June 30, 2023 and 2022, respectively.
Goodwill
Goodwill includes the excess of the fair value of the Company above the fair value accounting basis of the net assets and liabilities of the Company as previously applied under pushdown accounting in connection with the Refinitiv Transaction. Goodwill also includes the cost of acquired companies in excess of the fair value of identifiable net assets at the acquisition date, including the NFI Acquisition. Goodwill is not amortized, but is tested for impairment annually on October 1st and between annual tests, whenever events or changes in circumstances indicate that the carrying amount may not be fully recoverable. Goodwill is tested at the reporting unit level, which is defined as an operating segment or one level below the operating segment. The Company consists of one reporting unit for goodwill impairment testing purposes. An impairment loss is recognized if the estimated fair value of a reporting unit is less than its net book value. Such loss is calculated as the difference between the estimated fair value of goodwill and its carrying value.
Goodwill was last tested for impairment on October 1, 2022 and no impairment of goodwill was identified.
Intangible Assets
Intangible assets with a finite life are amortized over the estimated lives, ranging from seven to thirteen years. These intangible assets subject to amortization are tested for impairment whenever events or changes in circumstances suggest that an asset’s or asset group’s carrying value may not be fully recoverable. Intangible assets with an indefinite useful life are tested for impairment at least annually. An impairment loss is recognized if the sum of the estimated discounted cash flows relating to the asset or asset group is less than the corresponding book value.
As of June 30, 2023 and December 31, 2022, accumulated amortization related to intangible assets totaled $487.8 million and $434.2 million, respectively. Amortization expense for definite-lived intangible assets was $26.8 million for both the three months ended June 30, 2023 and 2022 and was $53.6 million for both the six months ended June 30, 2023 and 2022.
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Equity Investments Without Readily Determinable Fair Values
Equity Investments without a readily determinable fair value are measured at cost, less impairment, plus or minus observable price changes (in orderly transactions) of an identical or similar investment of the same issuer. If the Company determines that the equity investment is impaired on the basis of a qualitative assessment, the Company will recognize an impairment loss equal to the amount by which the investment’s carrying amount exceeds its fair value. Equity investments are included as a component of other assets on the condensed consolidated statements of financial condition.
Securities Sold Under Agreements to Repurchase
From time to time, the Company sells securities under agreements to repurchase in order to facilitate the clearance of securities. Securities sold under agreements to purchase are treated as collateralized financings and are presented in the condensed consolidated statements of financial condition at the amounts of cash received. Receivables and payables arising from these agreements are not offset in the condensed consolidated statements of financial condition.
Leases
At lease commencement, a right-of-use asset and a lease liability are recognized for all leases with an initial term in excess of 12 months based on the initial present value of the fixed lease payments over the lease term. The lease right-of-use asset also reflects the present value of any initial direct costs, prepaid lease payments and lease incentives. The Company’s leases do not provide a readily determinable implicit discount rate. Therefore, management estimates the Company’s incremental borrowing rate used to discount the lease payments based on the information available at lease commencement. The Company includes the term covered by an option to extend a lease when the option is reasonably certain to be exercised. The Company has elected not to separate non-lease components from lease components for all leases. Significant assumptions and judgments in calculating the lease right-of-use assets and lease liabilities include the determination of the applicable borrowing rate for each lease. Operating lease expense is recognized on a straight-line basis over the lease term and included as a component of occupancy expense in the consolidated statements of income.
Deferred Offering Costs
Deferred offering costs consist of legal, accounting and other costs directly related to the Company’s efforts to raise capital. These costs are recognized as a reduction in additional paid-in capital within the condensed consolidated statements of financial condition when the offering is effective. No offering costs were incurred during the three and six months ended June 30, 2023 and 2022.
Revenue Recognition
The Company’s classification of revenues in the condensed consolidated statements of income represents revenues from contracts with customers disaggregated by type of revenue. See Note 5 – Revenue for additional details regarding revenue types and the Company’s policies regarding revenue recognition.
Translation of Foreign Currency and Foreign Exchange Derivative Contracts
Revenues, expenses, assets and liabilities denominated in non-functional currencies are recorded in the appropriate functional currency for the legal entity at the rate of exchange prevailing at the transaction date. Monetary assets and liabilities that are denominated in non-functional currencies are then remeasured at the end of each reporting period at the exchange rate prevailing at the end of the reporting period. Foreign currency remeasurement gains or losses on monetary assets and liabilities in nonfunctional currencies are recognized in the condensed consolidated statements of income within general and administrative expenses. The realized and unrealized losses during both the three months ended June 30, 2023 and 2022 totaled $1.4 million and realized and unrealized losses during the six months ended June 30, 2023 and 2022 totaled $1.8 million and $1.7 million, respectively. Since the condensed consolidated financial statements are presented in U.S. dollars, the Company also translates all non-U.S. dollar functional currency revenues, expenses, assets and liabilities into U.S. dollars. All non-U.S. dollar functional currency revenue and expense amounts are translated into U.S. dollars monthly at the average exchange rate for the month. All non-U.S. dollar functional currency assets and liabilities are translated at the rate prevailing at the end of the reporting period. Gains or losses on translation in the financial statements, when the functional currency is other than the U.S. dollar, are included as a component of other comprehensive income.
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The Company enters into foreign currency forward contracts to mitigate its U.S. dollar and British pound sterling versus euro exposure, generally with a duration of less than 12 months. In June 2023, the Company also entered into a foreign currency call option on Australian dollars, see Note 4 – Acquisitions for additional details. The Company’s foreign exchange derivative contracts are not designated as hedges for accounting purposes. Changes in the fair value during the period of foreign currency forward contracts, which were entered into for foreign exchange risk management purposes relating to operating activities, are recognized in the condensed consolidated statements of income within general and administrative expenses and changes in the fair value during the period of the foreign currency call option on Australian dollars, which was entered into for foreign exchange risk management purposes relating to investing activities, are recognized in the condensed consolidated statements of income within other income/loss. The Company does not use derivative instruments for trading or speculative purposes. Realized and unrealized gains on foreign currency forward contracts during the three months ended June 30, 2023 and 2022 totaled $2.2 million and $5.5 million, respectively, and realized and unrealized gains on foreign currency forward contracts during the six months ended June 30, 2023 and 2022 totaled $1.0 million and $6.2 million, respectively. Realized and unrealized gains on the foreign currency call option on Australian dollars during both the three and six months ended June 30, 2023 totaled $0.6 million. As of June 30, 2023 and December 31, 2022, the counterparty on each of the foreign exchange derivative contracts was an affiliate of LSEG and therefore the corresponding assets or liabilities on such contracts were included in receivable and due from affiliates or payable and due to affiliates, respectively, on the accompanying condensed consolidated statements of financial condition. See Note 11 – Fair Value of Financial Instruments for additional details on the Companys derivative instruments.
Income Tax
The Corporation is subject to U.S. federal, state and local income taxes with respect to its taxable income, including its allocable share of any taxable income of TWM LLC, and is taxed at prevailing corporate tax rates. TWM LLC is a multiple member limited liability company taxed as a partnership and accordingly any taxable income generated by TWM LLC is passed through to and included in the taxable income of its members, including the Corporation. Income taxes also include unincorporated business taxes on income earned or losses incurred for conducting business in certain state and local jurisdictions, income taxes on income earned or losses incurred in foreign jurisdictions on certain operations and federal and state income taxes on income earned or losses incurred, both current and deferred, on subsidiaries that are taxed as corporations for U.S. tax purposes.
The Company records deferred tax assets and liabilities for the expected future tax consequences of temporary differences between the financial reporting and tax bases of assets and liabilities. The Company measures deferred taxes using the enacted tax rates and laws that will be in effect when such temporary differences are expected to reverse. The Company evaluates the need for valuation allowances based on the weight of positive and negative evidence. The Company records valuation allowances wherever management believes it is more likely than not that the Company will not be able to realize its deferred tax assets in the foreseeable future.
The Company records uncertain tax positions on the basis of a two-step process whereby (i) the Company determines whether it is more likely than not that the tax positions will be sustained on the basis of the technical merits of the position and (ii) for those tax positions that meet the more-likely-than-not recognition threshold, the Company recognizes the amount of tax benefit that is more than 50% likely to be realized upon ultimate settlement with the related tax authority.
The Company recognizes interest and penalties related to income taxes within the provision for income taxes in the condensed consolidated statements of income. Accrued interest and penalties are included within accounts payable, accrued expenses and other liabilities in the condensed consolidated statements of financial condition.
The Company has elected to treat taxes due on future U.S. inclusions in taxable income under the global intangible low-taxed income (“GILTI”) provision of the Tax Cuts and Jobs Act of 2017 as a current period expense when incurred.
On August 16, 2022, President Biden signed the Inflation Reduction Act of 2022 (“IRA”) into law. The IRA establishes a 15% corporate minimum tax effective for taxable years beginning after December 31, 2022, and imposes a 1% excise tax on the repurchase after December 31, 2022 of stock by publicly traded U.S. corporations. The Company has evaluated the impact of the IRA and concluded it did not have a material impact to our financial condition, results of operations and cash flows as of and for the three and six months ended June 30, 2023. The Company will continue to evaluate the impact of the IRA on subsequent periods.
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On October 8, 2021, the Organization for Economic Cooperation and Development announced an accord endorsing and providing an implementation plan focused on global profit allocation, and implementing a global minimum tax rate of at least 15% for large multinational corporations on a jurisdiction-by-jurisdiction basis, known as the “Two Pillar Plan.” On December 15, 2022, the European Council formally adopted a European Union directive on the implementation of the plan by January 1, 2024. The Company may be subject to the provisions of the Two Pillar Plan, and related tax impacts per local country adoption, as it is a consolidating subsidiary of LSEG. The Company will continue to monitor and evaluate the impact of the Two Pillar Plan on future periods as further information becomes available. 
Stock-Based Compensation
The stock-based payments received by the employees of the Company are accounted for as equity awards. The Company measures and recognizes the cost of employee services received in exchange for awards of equity instruments based on their estimated fair values measured as of the grant date. These costs are recognized as an expense over the requisite service period, with an offsetting increase to additional paid-in capital. The grant-date fair value of stock-based awards that do not require future service (i.e., vested awards) are expensed immediately. Forfeitures of stock-based compensation awards are recognized as they occur.
For grants made during the post-IPO period, the fair value of the equity instruments is determined based on the price of the Class A common stock on the grant date.
Prior to the IPO, the Company awarded options to management and other employees (collectively, the “Special Option Award”) under the Amended and Restated Tradeweb Markets Inc. Option Plan (the “Option Plan”). The significant assumptions used to estimate the fair value as of grant date of the options awarded prior to the IPO did not reflect changes that would have occurred to these assumptions as a result of the IPO. The non-cash stock-based compensation expense associated with the Special Option Award began being expensed in the second quarter of 2019.
The Company uses the Black-Scholes pricing model to value some of its option awards. Determining the appropriate fair value model and calculating the fair value of the option awards requires the input of highly subjective assumptions, including the expected life of the option awards and the stock price volatility.
For performance-based restricted stock units that vest based on market conditions, the Company recognizes stock-based compensation based on the estimated grant date fair value of the awards computed with the assistance of a valuation specialist using a Monte Carlo simulation on a binomial model. The significant assumptions used to estimate the fair value of the performance-based restricted stock units that vest based on market conditions are years of maturity, annualized volatility and the risk-free interest rate. The maturity period represents the period of time that the award granted was modeled into the future, the risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of measurement corresponding with the maturity period of the award and the expected volatility is based upon historical volatility of the Company’s Class A common stock.
Earnings Per Share
Basic and diluted earnings per share are computed in accordance with the two-class method as unvested restricted stock units and unsettled vested performance-based restricted stock units issued to certain retired executives are entitled to non-forfeitable dividend equivalent rights and are considered participating securities prior to being issued and outstanding shares of common stock. The two-class method is an earnings allocation formula that treats a participating security as having rights to earnings that otherwise would have been available to common shareholders. Basic earnings per share is computed by dividing the net income attributable to the Company’s outstanding shares of Class A and Class B common stock by the weighted-average number of the Company’s shares outstanding during the period. For purposes of computing diluted earnings per share, the weighted-average number of the Company’s shares reflects the dilutive effect that could occur if all potentially dilutive securities were converted into or exchanged or exercised for the Company’s Class A or Class B common stock.
The dilutive effect of stock options and other stock-based payment awards is calculated using the treasury stock method, which assumes the proceeds from the exercise of these instruments are used to purchase common shares at the average market price for the period. The dilutive effect of LLC Interests is evaluated under the if-converted method, where the securities are assumed to be converted at the beginning of the period, and the resulting common shares are included in the denominator of the diluted earnings per share calculation for the entire period presented. Performance-based awards are considered contingently issuable shares and their dilutive effect is included in the denominator of the diluted earnings per share calculation for the entire period, if those shares would be issuable as of the end of the reporting period, assuming the end of the reporting period was also the end of the contingency period.
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Shares of Class C and Class D common stock do not have economic rights in Tradeweb Markets Inc. and, therefore, are not included in the calculation of basic earnings per share.
Fair Value Measurement
The fair value of a financial instrument is the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (the exit price). Instruments that the Company owns (long positions) are marked to bid prices, and instruments that the Company has sold, but not yet purchased (short positions) are marked to offer prices. Fair value measurements do not include transaction costs.
The fair value hierarchy under ASC 820, Fair Value Measurement (“ASC 820”), prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (level 1 measurements) and the lowest priority to unobservable inputs (level 3 measurements). The three levels of the fair value hierarchy under ASC 820 are described below.
Basis of Fair Value Measurement
A financial instrument’s level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement.
Level 1: Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities;
Level 2: Quoted prices in markets that are not considered to be active or financial instruments for which all significant inputs are observable, either directly or indirectly;
Level 3: Prices or valuations that require inputs that are both significant to the fair value measurement and unobservable.
Recent Accounting Pronouncements
In June 2022, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2022-03, Fair Value Measurement (Topic 820): Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions (“ASU 2022-03”), which clarifies that a contractual restriction on the sale of an equity security is not considered part of the unit of account of the equity security and, therefore, is not considered in measuring fair value and that an entity cannot, as a separate unit of account, recognize and measure a contractual sale restriction. ASU 2022-03 also requires the disclosure of the fair value, as reflected in the statement of financial condition, of equity securities subject to contractual sale restrictions and the nature and the disclosure of the remaining duration of those restrictions. ASU 2022-03 is effective for the Company beginning on January 1, 2024 and early adoption is permitted for both interim and annual financial statements that have not yet been issued. The ASU is to be applied prospectively, with any adjustments from the adoption recognized in earnings on the date of adoption. As of June 30, 2023, the Company has not yet adopted ASU 2022-03 and does not expect that the adoption of this ASU will have a material impact on the Company’s consolidated financial statements.
3.    Restricted Cash
Cash has been segregated in a special reserve bank account for the benefit of brokers and dealers under SEC Rule 15c3-3. The Company computes the proprietary accounts of broker-dealers (“PAB”) reserve, which requires the Company to maintain minimum segregated cash in the amount of excess total credits per the reserve computation. As of June 30, 2023 and December 31, 2022, cash in the amount of $1.5 million and $1.0 million, respectively, has been segregated in the PAB reserve account, exceeding the requirements pursuant to SEC Rule 15c3-3.
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4.    Acquisitions
On May 25, 2023, the Company entered into a definitive agreement to acquire all of the outstanding equity interests of Yieldbroker Pty Limited (“Yieldbroker”) for A$125 million in cash ($82.7 million U.S. dollars as translated as of June 30, 2023), subject to working capital adjustments. Yieldbroker is a leading Australian trading platform for Australian and New Zealand government bonds and interest rate derivatives covering the institutional, wholesale and primary markets. The acquisition is expected to close later this year, subject to the satisfaction of customary closing conditions and regulatory reviews.
On June 1, 2023, the Company entered into a foreign currency call option on Australian dollars, giving the Company an option to buy A$120.7 million ($79.9 million U.S. dollars as translated as of June 30, 2023), in order to partially mitigate the Company’s U.S. dollar versus Australian dollar foreign exchange exposure on the anticipated payment of the Australian dollar denominated purchase price for the expected Yieldbroker acquisition. The counterparty on the foreign currency call option contract is an affiliate of LSEG and therefore as of June 30, 2023, the corresponding asset related to the fair value of the contract was included in receivable and due from affiliates on the accompanying condensed consolidated statements of financial condition. See Note 11 – Fair Value of Financial Instruments for additional details.
5.    Revenue
Revenue Recognition
The Company enters into contracts with its clients to provide a stand-ready connection to its electronic marketplaces, which facilitates the execution of trades by its clients. The access to the Company’s electronic marketplaces includes market data, continuous pricing data refreshes and the processing of trades thereon. The stand-ready connection to the electronic marketplaces is considered a single performance obligation satisfied over time as the client simultaneously receives and consumes the benefit from the Company’s performance as access is provided (that is, the performance obligation constitutes a series of services that are substantially the same in nature and are provided over time using the same measure of progress). For its services, the Company earns subscription fees for granting access to its electronic marketplaces. Subscription fees, which are generally fixed fees, are recognized as revenue on a monthly basis, in the period that access is provided. The frequency of subscription fee billings varies from monthly to annually, depending on contract terms. Fees received by the Company which are not yet earned are included in deferred revenue on the condensed consolidated statements of financial condition until the revenue recognition criteria have been met. The Company also earns transaction fees and/or commissions from transactions executed on the Company’s electronic marketplaces. The Company earns commission revenue from its electronic and voice brokerage services on a riskless principal basis. Riskless principal revenues are derived on matched principal transactions where revenues are earned on the spread between the buy and sell price of the transacted product. Transaction fees and commissions are generated both on a variable and fixed price basis and vary by geographic region, product type and trade size. Fixed monthly transaction fees or commissions, or monthly transaction fees or commission minimums, are earned on a monthly basis in the period the stand-ready trading services are provided and are generally billed monthly. For variable transaction fees or commissions, the Company charges its clients amounts calculated based on the mix of products traded and the volume of transactions executed. Variable transaction fee or commission revenue is recognized and recorded on a trade-date basis when the individual trade occurs and is generally billed when the trade settles or is billed monthly. Variable discounts or rebates on transaction fees or commissions are earned and applied monthly or quarterly, resolved within the same reporting period and are recorded as a reduction to revenue in the period the relevant trades occur.
The Company earns fees from Refinitiv relating to the sale of market data to Refinitiv, which redistributes that data. Included in these fees, which are billed quarterly, are real-time market data fees which are recognized monthly on a straight-line basis, as Refinitiv receives and consumes the benefit evenly over the contract period, as the data is provided. Also included in these fees are fees for historical data sets which are recognized when the historical data set is provided to Refinitiv. Significant judgments used in accounting for this contract include the following determinations:
The provision of real-time market data feeds and annual historical data sets are distinct performance obligations.
The performance obligations under this contract are recognized over time from the initial delivery of the data feeds or each historical data set until the end of the contract term.
The transaction price for the performance obligations is determined by using a market assessment analysis. Inputs in this analysis include a consultant study which determined the overall value of the Company’s market data and pricing information for historical data sets provided by other companies.
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Some revenues earned by the Company have fixed fee components, such as monthly minimums or fixed monthly fees, and variable components, such as transaction-based fees. The breakdown of revenues between fixed and variable revenues for the three and six months ended June 30, 2023 and 2022 is as follows:
Three Months EndedThree Months Ended
June 30, 2023June 30, 2022
(in thousands)
(in thousands)
Variable
Fixed
Variable
Fixed
Revenues
Transaction fees and commissions$209,634 $36,827 $201,199 $36,470 
Subscription fees470 45,278 485 41,055 
Refinitiv market data fees 15,461  15,426 
Other264 2,679 214 2,289 
Total revenue$210,368 $100,245 $201,898 $95,240 
Six Months EndedSix Months Ended
June 30, 2023June 30, 2022
(in thousands)
(in thousands)
Variable
Fixed
Variable
Fixed
Revenues
Transaction fees and commissions$439,815 $73,244 $414,935 $74,539 
Subscription fees930 89,192 960 82,035 
Refinitiv market data fees 31,055  30,984 
Other466 5,160 465 4,706 
Total revenue$441,211 $198,651 $416,360 $192,264 
Deferred Revenue
The Company records deferred revenue when cash payments are received or due in advance of services to be performed. The revenue recognized and the remaining deferred revenue balances are shown below:
Amount
(in thousands)
Deferred revenue balance - December 31, 2022$22,827 
New billings65,426 
Revenue recognized(60,874)
Effect of foreign currency exchange rate changes33 
Deferred revenue balance - June 30, 2023$27,412 
During the six months ended June 30, 2023, the Company recognized $19.6 million in total revenue that was deferred as of December 31, 2022. During the six months ended June 30, 2022, the Company recognized $20.2 million in total revenue that was deferred as of December 31, 2021.
6.    Income Taxes
The Corporation is subject to U.S. federal, state and local income taxes with respect to its taxable income, including its allocable share of any taxable income of TWM LLC, and is taxed at prevailing corporate tax rates. The Company’s actual effective tax rate will be impacted by the Corporation’s ownership share of TWM LLC, which will continue to increase as Continuing LLC Owners that continue to hold LLC Interests redeem or exchange their LLC Interests for shares of Class A common stock or Class B common stock, as applicable, or the Corporation purchases LLC Interests from such Continuing LLC Owners. The Company’s consolidated effective tax rate will also vary from period to period depending on changes in the mix of earnings, tax legislation and tax rates in various jurisdictions. The Company’s provision for income taxes includes U.S., federal, state, local and foreign taxes.
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The Company’s effective tax rate for the three months ended June 30, 2023 and 2022 was approximately 22.2% and 23.8%, respectively. The effective tax rate for the three months ended June 30, 2023 differed from the U.S. federal statutory rate of 21.0% primarily due to the disallowance of compensation expense tax deductions and state, local and foreign taxes, partially offset by the effect of non-controlling interests. The effective tax rate for the three months ended June 30, 2022 differed from the U.S. federal statutory rate of 21.0% primarily due to the effect of state, local and foreign taxes, partially offset by non-controlling interests.
The Company’s effective tax rate for the six months ended June 30, 2023 and 2022 was approximately 23.4% and 18.0%, respectively. The effective tax rate for the six months ended June 30, 2023 differed from the U.S. federal statutory rate of 21.0% primarily due to the disallowance of compensation expense tax deductions and state, local and foreign taxes, partially offset by the effect of non-controlling interests. The effective tax rate for the six months ended June 30, 2022 differed from the U.S. federal statutory rate of 21.0% primarily due to the tax impact of the issuance of common stock from equity incentive plans, return-to-provision adjustments and the effect of non-controlling interests, partially offset by state, local and foreign taxes.