Fitch Affirms Cantor and BGC's Long-Term IDR at 'BBB'; Outlook Stable

Fitch Ratings has affirmed Cantor Fitzgerald, L.P.'s (Cantor) and BGC Partners, Inc.'s (BGC) long-term Issuer Default Rating (IDR) and short-term IDR at 'BBB' and 'F2', respectively. The Rating Outlook is Stable.

A key ratings consideration is Cantor's modest risk profile. In its primary role as intermediary at this time, the company takes limited balance sheet risk. As principal, it matches buyers and sellers with little, if any, gap between the two sides in delivery-versus-payment settlement.

Counterparty risk appears to be well-managed through client selection, netting, collateral agreements and use of exchanges. Losses due to counterparty default are rare. Market risk is also contained. There is no proprietary trading conducted at this time; unmatched or open positions may only be held temporarily, to facilitate customer flows. Inventory is limited in size, comprising highly liquid securities, with high turnover.

Since the company's capital supports a large matched book business, its leverage ratios can significantly fluctuate within a reporting period. However, like its peers, Cantor's leverage numbers have been trending down since 2007. Should adjusted and net adjusted leverage levels trend higher, ratings may be pressured. In addition, downward rating pressure could occur should capital and liquidity levels fail to sufficiently support any increased risk appetite.

The majority of Cantor's balance sheet is funded utilizing equity and secured funding sources. Unsecured short-term funding is minimal. Excess liquidity is maintained at the main operating companies as well as at the holding company. Intercompany and external facilities are in place to address any funding gaps that may arise. The company's senior notes have nine- and four-year remaining maturities, effectively lengthening and laddering the debt maturity profile.

Cantor has embarked on an expansion plan that entails geographical expansion of select trading products, and development of investment banking, CRE and prime brokerage businesses. A number of nascent ventures have also been initiated (e.g. gaming, insurance) that bear little strategic relevance to the core business. Fitch will follow the company as its expansion efforts evolve, with particular interest in revenue diversity, earnings generation, and resource allocation (capital, personnel, and systems).

At this time, several of these non-core businesses contribute marginally, if at all, to consolidated performance, with measured deployment of capital deployment to date. Consequently, these ancillary businesses are not ratings drivers at this juncture. Over time, however, one or more could increase financial, operational or reputational risk to a magnitude that would result in adverse rating actions.

In addition, downward rating pressure could occur if capital and liquidity levels fail to sufficiently support any increased risk appetite in the company's core trading activities. Ratings could also come under pressure should financial performance deteriorate in the BGC inter-dealer brokerage business without a commensurate improvement in institutional brokerage activities.

Positive rating momentum is constrained in the near-term by Cantor's limited product base and small size vis-a-vis larger, more capitalized trading houses.

The rating affirmation of BGC reflects the company's strong franchise as one of the world's largest inter-dealer broker (IDB), low credit and market risk profile, sound cash generation, and modest liquidity and funding needs. Ratings are constrained by high operational risks inherent in the IDB business, cyclicality of revenue lines, and the high earnings distribution/low earnings retention model. BGC's and Cantor's ratings are linked due to the significant interrelationship between the two companies.

The Stable Outlook reflects Fitch's expectations that low risk businesses remain the primary revenue generators, profitability is sustained, risk appetite is controlled, liquidity is readily accessible, operational risk management is effective and capital levels are sufficient to support the franchise.

The business of Cantor and its subsidiaries is primarily wholesale and institutional brokerage of listed and over-the-counter (OTC) financial instruments and related derivatives; Treasury dealer, repo and securities lending, investment banking, and market data and analytics round out the menu of products and services. The major subsidiaries of this private partnership are: Cantor Fitzgerald & Co. (CFCo), the U.S. broker-dealer; Cantor Fitzgerald Europe, the UK broker-dealer; and BGC Partners, Inc. (BGC), formerly eSpeed Inc. Headquartered in New York City, Cantor has 4,500 employees located in 60 offices in 15 countries. Cantor is owned by CF Group Management, Inc, the managing general partner, and several hundred limited partners.

Fitch has affirmed the following ratings:

Cantor Fitzgerald, L.P.
--Long-term IDR at 'BBB';
--Short-term IDR at 'F2'
--Senior debt 'BBB'.

BGC Partners, Inc.
--Long-term IDR at 'BBB';
--Senior unsecured Debt at 'BBB';
--Short-term IDR at 'F2'.

The Rating Outlook is Stable.

Additional information is available at www.fitchratings.com.

Applicable Criteria and Related Research:
--'Global Financial Institutions Criteria' (Aug. 16, 2011);
--'Rating Criteria for Securities Firms' (Aug. 16, 2011);
--'Rating Banks in a Changing World' (Oct. 13, 2011).

Applicable Criteria and Related Research:
Rating Banks in a Changing World (Credit Ratings Reflect Evolving Risk Profiles)
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=653478
Global Financial Institutions Rating Criteria
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=649171

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