11.	Fair Value of Financial Assets and Liabilities

FASB guidance establishes a fair value hierarchy that 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 are as follows:

Level 1 measurements—Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities.

Level 2 measurements—Quoted prices in markets that are not active or financial instruments for which all significant inputs are observable, either directly or indirectly.

Level 3 measurements—Prices or valuations that require inputs that are both significant to the fair value measurement and unobservable.

As required by FASB guidance, assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. The following tables set forth by level within the fair value hierarchy financial assets and liabilities accounted for at fair value under FASB guidance at June 30, 2017 and December 31, 2016 (in thousands):

	Assets at Fair Value at June 30, 2017
	Level 1		Level 2		Level 3		Netting and Collateral			Total
Marketable securities	$	169,241	$	—	$	—	$	—		$	169,241
Government debt		33,621		—		—		—			33,621
Securities owned—Equities		122		—		—		—			122
Forwards		—		170		—		(1	)		169
Foreign exchange swaps		—		3,141		—		(325	)		2,816
Interest rate swaps		—		227		—		—			227
Total	$	202,984	$	3,538	$	—	$	(326	)	$	206,196

	Liabilities at Fair Value at June 30, 2017
	Level 1		Level 2		Level 3		Netting and Collateral			Total
Forwards	$	—	$	66	$	—	$	(1	)	$	65
Futures		—		1,734		—		—			1,734
Foreign exchange/commodities options		1,588		—		—		—			1,588
Foreign exchange swaps		—		4,289		—		(325	)		3,964
Contingent consideration		—		—		58,396		—			58,396
Total	$	1,588	$	6,089	$	58,396	$	(326	)	$	65,747

	Assets at Fair Value at December 31, 2016
	Level 1		Level 2		Level 3		Netting and Collateral			Total
Marketable securities	$	164,820	$	—	$	—	$	—		$	164,820
Government debt		35,190		—		—		—			35,190
Securities owned—Equities		167		—		—		—			167
Forwards		—		57		—		(22	)		35
Foreign exchange swaps		—		3,441		—		(495	)		2,946
Interest rate swaps		—		231		—		(29	)		202
Foreign exchange/commodities options		244		—		—		—			244
Total	$	200,421	$	3,729	$	—	$	(546	)	$	203,604

	Liabilities at Fair Value at December 31, 2016
	Level 1		Level 2		Level 3		Netting and Collateral			Total
Forwards	$	—	$	58	$	—	$	(22	)	$	36
Foreign exchange swaps		—		1,472		—		(495	)		977
Futures		—		512		—		—			512
Interest rate swaps		—		29		—		(29	)		—
Foreign exchange/commodities options		41		—		—		—			41
Contingent consideration		—		—		55,614		—			55,614
Total	$	41	$	2,071	$	55,614	$	(546	)	$	57,180

Changes in Level 3 contingent consideration measured at fair value on a recurring basis for the three months ended June 30, 2017 are as follows (in thousands):

	Opening Balance as of April 1, 2017		Total realized and unrealized gains (losses) included in Net income (loss) ⁽¹⁾			Unrealized gains (losses) included in Other comprehensive income (loss)			Issuances		Settlements			Closing Balance at June 30, 2017		Unrealized gains (losses) for Level 3 Assets / Liabilities Outstanding at June 30, 2017
Liabilities
Accounts payable, accrued and other liabilities:
Contingent consideration	$	52,737	$	(2,727	)	$	(1,115	)	$	2,172	$	(355	)	$	58,396	$	(3,842	)

⁽¹⁾	Realized and unrealized gains (losses) are reported in “Other expenses” and “Other income (loss),” as applicable, in the Company’s unaudited condensed consolidated statements of operations.

Changes in Level 3 contingent consideration measured at fair value on a recurring basis for the three months ended June 30, 2016 are as follows (in thousands):

	Opening Balance as of April 1, 2016		Total realized and unrealized gains (losses) included in Net income (loss) ⁽¹⁾			Unrealized gains (losses) included in Other comprehensive income (loss)		Issuances		Settlements			Closing Balance at June 30, 2016		Unrealized gains (losses) for Level 3 Assets / Liabilities Outstanding at June 30, 2016
Liabilities
Accounts payable, accrued and other liabilities:
Contingent consideration	$	64,337	$	(749	)	$	80	$	578	$	(3,312	)	$	62,272	$	(699	)

(1)	Realized and unrealized gains (losses) are reported in “Other expenses” and “Other income (loss),” as applicable, in the Company’s unaudited condensed consolidated statements of operations.

Changes in Level 3 contingent consideration measured at fair value on a recurring basis for the six months ended June 30, 2017 are as follows (in thousands):

	Opening Balance as of January 1, 2017		Total realized and unrealized gains (losses) included in Net income (loss) ⁽¹⁾			Unrealized gains (losses) included in Other comprehensive income (loss)			Issuances		Settlements			Closing Balance at June 30, 2017		Unrealized gains (losses) for Level 3 Assets / Liabilities Outstanding at June 30, 2017
Liabilities
Accounts payable, accrued and other liabilities:
Contingent consideration	$	55,614	$	(3,769	)	$	(1,159	)	$	8,363	$	(10,509	)	$	58,396	$	(4,929	)

Changes in Level 3 contingent consideration measured at fair value on a recurring basis for the six months ended June 30, 2016 are as follows (in thousands):

	Opening Balance as of January 1, 2016		Total realized and unrealized gains (losses) included in Net income (loss) ⁽¹⁾			Unrealized gains (losses) included in Other comprehensive income (loss)		Issuances		Settlements			Closing Balance at June 30, 2016		Unrealized gains (losses) for Level 3 Assets / Liabilities Outstanding at June 30, 2016
Liabilities
Accounts payable, accrued and other liabilities:
Contingent consideration	$	65,043	$	(748	)	$	78	$	1,411	$	(4,852	)	$	62,272	$	(670	)

The following tables present information about the offsetting of derivative instruments and collateralized transactions as of June 30, 2017 and December 31, 2016 (in thousands):

	June 30, 2017
						Net Amounts Presented in the		Gross Amounts Not Offset
	Gross Amounts		Gross Amounts Offset			Statements of Financial Condition		Financial Instruments		Cash Collateral Received		Net Amount
Assets
Forwards	$	170	$	(1	)	$	169	$	—	$	—	$	169
Foreign exchange swaps		3,141		(325	)		2,816		—		—		2,816
Interest rate swaps		227		—			227		—		—		227
Total	$	3,538	$	(326	)	$	3,212	$	—	$	—	$	3,212
Liabilities
Forwards	$	66	$	(1	)	$	65	$	—	$	—	$	65
Foreign exchange swaps		4,289		(325	)		3,964		—		—		3,964
Futures		1,734		—			1,734		—		—		1,734
Foreign exchange/commodities options		1,588		—			1,588		—		—		1,588
Total	$	7,677	$	(326	)	$	7,351	$	—	$	—	$	7,351

	December 31, 2016
						Net Amounts Presented in the		Gross Amounts Not Offset
	Gross Amounts		Gross Amounts Offset			Statements of Financial Condition		Financial Instruments		Cash Collateral Received		Net Amount
Assets
Forwards	$	57	$	(22	)	$	35	$	—	$	—	$	35
Foreign exchange swaps		3,441		(495	)		2,946		—		—		2,946
Interest rate swaps		231		(29	)		202		—		—		202
Foreign exchange/commodities options		244		—			244		—		—		244
Total	$	3,973	$	(546	)	$	3,427	$	—	$	—	$	3,427
Liabilities
Forwards	$	58	$	(22	)	$	36	$	—	$	—	$	36
Foreign exchange swaps		1,472		(495	)		977		—		—		977
Interest rate swaps		29		(29	)		—		—		—		—
Futures		512		—			512		—		—		512
Foreign exchange/commodities options		41		—			41		—		—		41
Total	$	2,112	$	(546	)	$	1,566	$	—	$	—	$	1,566

Certain of the Company’s foreign exchange swaps are with Cantor. See Note 12—“Related Party Transactions,” for additional information related to these transactions.

Quantitative Information About Level 3 Fair Value Measurements

The following tables present quantitative information about the significant unobservable inputs utilized by the Company in the fair value measurement of Level 3 assets and liabilities measured at fair value on a recurring basis (in thousands):

Fair Value

as of

June 30,

2017

Valuation Technique

Unobservable Inputs

Range

Weighted

Average

Liabilities

Accounts payable, accrued and other liabilities:

Contingent consideration

58,396

Present value of

expected payments

Discount rate

Probability of meeting earnout

3.3%-9.6%

75%-100%

8.3%

96% (1)

(1)	The probability of meeting the earnout targets as of June 30, 2017 was based on the acquired businesses’ projected future financial performance, including revenues.

Fair Value

as of

December 31,

2016

Valuation Technique

Unobservable Inputs

Range

Weighted

Average

Liabilities

Accounts payable, accrued and other liabilities:

Contingent consideration

55,614

Present value of

expected payments

Discount rate

Probability of meeting earnout

3.3%-9.2%

75%-100%

6.3%

96% (1)

(1)	The probability of meeting the earnout targets as of December 31, 2016 was based on the acquired businesses’ projected future financial performance, including revenues.

Valuation Processes – Level 3 Measurements

Valuations for contingent consideration are conducted by the Company. Each reporting period, the Company updates unobservable inputs. The Company has a formal process to review the material accuracy of changes in fair value.

Sensitivity Analysis – Level 3 Measurements

The significant unobservable inputs used in the fair value of the Company’s contingent consideration are the discount rate and forecasted financial information. Significant increases (decreases) in the discount rate would have resulted in a lower (higher) fair value measurement. Significant increases (decreases) in the forecasted financial information would have resulted in a higher (lower) fair value measurement. As of June 30, 2017 and December 31, 2016, the present value of expected payments related to the Company’s contingent consideration was $58.4 million and $55.6 million, respectively. The undiscounted value of the payments, assuming that all contingencies are met, would be $70.3 million and $69.0 million, respectively.