BGC executives suggested to leaders of each brokerage that the way to create
value out of an acquisition was to cut the brokers’ commission rates by a couple
of percentage points and more than make that up with payments in shares of
stock, the sources, with intimate knowledge of the proposals, said.

BGC made the pitch to those firms — and possibly others — about six months
ago, the insiders said. It was not known if that was the same proposal presented
to Newmark.

A spokesperson for Cushman, which is led by CEO Glenn Rufrano, said as a matter of policy it did not comment on “rumor or speculation.” A top executive of the firm who would be
involved in such talks, said, “this is news to me and [I] have never heard of such
a contact.”

Michael Colacino, Studley’s president, declined to comment. Executives for BGC
were not immediately available for comment, a spokesperson said.

According to one of the sources, BGC executives said, “We can get value” out
of the acquisition through the cut to commissions. The other source explained
if a broker had the typical split of 55 percent, the cash payment might be cut to
53 percent. But that difference would be made up for in stock. As an incentive,
the firm would pay 4 percentage points in stock, yielding a total split valued at 57
percent, two points higher than the current 55 percent used in the example.

BGC, based in Midtown, was formed in 2008 from a merger of eSpeed and BGC
Partners, and its stock is publicly traded on NASDAQ. Its stock closed today
at $8.31 per share, while over the past 12 months it traded between $4.69 per
share and $10.07 per share.

Patrick O’Shaughnessy, an analyst with Raymond James & Associates, set
the target price for the stock at $9.50 per share earlier this month following the
release of BGC’s first-quarter 2011 earnings report.

The idea is to preserve the cash for the bottom line in the near term and use
that to hire more brokers or otherwise help the company, because the stock
payments would be tied up for several years, and thus not accounted for in the
near term as expenses, the source said.

“[Lutnick’s] whole methodology is ‘pay it forward,'” the second insider said. But
the risk is that brokers are extremely sensitive to anyone fidgeting with their fees.

“It is also super-controversial,” the source said. “It is sort of like the first-born
male child of the brokerage community — ‘the split’ — and so when you talk about
monkeying with it, it gets people crazy.”