13.	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 September 30, 2017 and December 31, 2016 (in thousands):

	Assets at Fair Value at September 30, 2017
	Level 1		Level 2		Level 3		Netting and Collateral			Total
Loans held for sale	$	—	$	660,332	$	—	$	—		$	660,332
Marketable securities		259,442		—		—		—			259,442
Government debt		32,019		—		—		—			32,019
Securities owned—Equities		102		—		—		—			102
Forwards		—		16		6,422		(2	)		6,436
Rate lock commitments		—		—		4,678		—			4,678
Foreign exchange swaps		—		4,078		—		(949	)		3,129
Foreign exchange/commodities options		1,013		—		—		—			1,013
Interest rate swaps		—		245		—		—			245
Futures		—		67		—		—			67
Total	$	292,576	$	664,738	$	11,100	$	(951	)	$	967,463

	Liabilities at Fair Value at September 30, 2017
	Level 1		Level 2		Level 3		Netting and Collateral			Total
Foreign exchange swaps	$	—	$	2,689	$	—	$	(949	)	$	1,740
Rate lock commitments		—		—		863	—				863
Forwards		—		429		167		(2	)		594
Futures		—		442		—		—			442
Foreign exchange/commodities options		313		—		—		—			313
Contingent consideration		—		—		71,406		—			71,406
Total	$	313	$	3,560	$	72,436	$	(951	)	$	75,358

	Assets at Fair Value at December 31, 2016
	Level 1		Level 2		Level 3		Netting and Collateral			Total
Loans held for sale	$	—	$	1,071,836	$	—	$	—		$	1,071,836
Marketable securities		164,820	—		—		—				164,820
Government debt		35,190		—		—		—			35,190
Securities owned—Equities		167		—		—		—			167
Forwards		—		57		17,824		(22	)		17,859
Foreign exchange swaps		—		3,441		—		(495	)		2,946
Rate lock commitments		—	—			2,100	—				2,100
Foreign exchange/commodities options		244	—		—		—				244
Interest rate swaps		—		202		—		—			202
Total	$	200,421	$	1,075,536	$	19,924	$	(517	)	$	1,295,364

	Liabilities at Fair Value at December 31, 2016
	Level 1		Level 2		Level 3		Netting and Collateral			Total
Rate lock commitments	$	—	$	—	$	9,670	$	—		$	9,670
Foreign exchange swaps		—		1,472		—		(495	)		977
Futures		—		512		—		—			512
Foreign exchange/commodities options		41		—		—		—			41
Forwards		—		58	—			(22	)		36
Contingent consideration		—		—		66,004		—			66,004
Total	$	41	$	2,042	$	75,674	$	(517	)	$	77,240

Level 3 Assets and Liabilities

Changes in Level 3 assets and liabilities measured at fair value on a recurring basis for the three months ended September 30, 2017 are as follows (in thousands):

	Opening Balance as of July 1, 2017		Total realized and unrealized gains (losses) included in Net income (loss)			Unrealized gains (losses) included in Other comprehensive income (loss)			Issuances		Settlements			Closing Balance at September 30, 2017		Unrealized gains (losses) for Level 3 Assets / Liabilities Outstanding at September 30, 2017
Assets
Rate lock commitments and forwards, net	$	10,566	$	10,070		$	—		$	—	$	(10,566	)	$	10,070	$	10,070
Liabilities
Accounts payable, accrued and other liabilities:
Contingent consideration¹	$	69,003	$	(1,959	)	$	(884	)	$	1,262	$	(1,702	)	$	71,406	$	(2,844	)

Changes in Level 3 assets and liabilities measured at fair value on a recurring basis for the three months ended September 30, 2016 are as follows (in thousands):

	Opening Balance as of July 1, 2016		Total realized and unrealized gains (losses) included in Net income (loss)		Unrealized gains (losses) included in Other comprehensive income (loss)		Issuances		Settlements			Closing Balance at September 30, 2016		Unrealized gains (losses) for Level 3 Assets / Liabilities Outstanding at September 30, 2016
Assets
Rate lock commitments and forwards, net	$	5,115	$	5,182	$	-	$	-	$	(5,115	)	$	5,182	$	5,182
Liabilities
Accounts payable, accrued and other liabilities:
Contingent consideration¹	$	72,854	$	16,571	$	53	$	5,631	$	(1,299	)	$	60,562	$	(643	)

Changes in Level 3 assets and liabilities measured at fair value on a recurring basis for the nine months ended September 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)			Unrealized gains (losses) included in Other comprehensive income (loss)			Issuances		Settlements			Closing Balance at September 30, 2017		Unrealized gains (losses) for Level 3 Assets / Liabilities Outstanding at September 30, 2017
Assets
Rate lock commitments and forwards, net	$	10,254	$	10,070		$	-		$	-	$	(10,254	)	$	10,070	$	10,070
Liabilities
Accounts payable, accrued and other liabilities:
Contingent consideration¹	$	66,004	$	(5,946	)	$	(2,043	)	$	9,624	$	(12,211	)	$	71,406	$	(7,990	)

Changes in Level 3 assets and liabilities measured at fair value on a recurring basis for the nine months ended September 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)		Unrealized gains (losses) included in Other comprehensive income (loss)		Issuances		Settlements			Closing Balance at September 30, 2016		Unrealized gains (losses) for Level 3 Assets / Liabilities Outstanding at September 30, 2016
Assets
Rate lock commitments and forwards, net	$	6,300	$	5,182	$	-	$	-	$	(6,300	)	$	5,182	$	5,182
Liabilities
Accounts payable, accrued and other liabilities:
Contingent consideration¹	$	75,061	$	15,258	$	131	$	7,042	$	(6,152	)	$	60,562	$	(1,878	)

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.

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

	September 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	$	6,438	$	(2	)	$	6,436	$	—	$	—	$	6,436
Rate lock commitments		4,678		—			4,678		—		—		4,678
Foreign exchange swaps		4,078		(949	)		3,129		—		—		3,129
Foreign exchange/commodities options		1,013		—			1,013		—		—		1,013
Interest rate swaps		245		—			245		—		—		245
Futures		67		—			67		—		—		67
Total	$	16,519	$	(951	)	$	15,568	$	—	$	—	$	15,568
Liabilities
Foreign exchange swaps	$	2,689	$	(949	)	$	1,740	$	—	$	—	$	1,740
Rate lock commitments		863		—			863		—		—		863
Forwards		596		(2	)		594		—		—		594
Futures		442		—			442		—		—		442
Foreign exchange/commodities options		313		—			313		—		—		313
Total	$	4,903	$	(951	)	$	3,952	$	—	$	—	$	3,952

	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	$	17,881	$	(22	)	$	17,859	$	—	$	—	$	17,859
Foreign exchange swaps		3,441		(495	)		2,946		—		—		2,946
Rate lock commitments		2,100	—				2,100		—		—		2,100
Foreign exchange/commodities options		244		—			244		—		—		244
Interest rate swaps		202		—			202		—		—		202
Total	$	23,868	$	(517	)	$	23,351	$	—	$	—	$	23,351
Liabilities
Rate lock commitments	$	9,670	$	—		$	9,670	$	—	$	—	$	9,670
Foreign exchange swaps		1,472		(495	)		977		—		—		977
Futures		512		—			512		—		—		512
Foreign exchange/commodities options		41		—			41		—		—		41
Forwards		58		(22	)		36		—		—		36
Total	$	11,753	$	(517	)	$	11,236	$	—	$	—	$	11,236

Certain of the Company’s foreign exchange swaps are with Cantor. See Note 17—“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

September 30,

2017

Assets

Liabilities

Valuation Technique

Unobservable Inputs

Range

Weighted

Average

Rate lock commitments

4,678

863

Discounted cash flow model and other observable market data

Counterparty credit risk

N/A

Forwards

6,422

167

Discounted cash flow model and other observable market data

Counterparty credit risk

N/A

Accounts payable, accrued and other liabilities:

Contingent consideration

—

71,406

Present value of

expected payments

Discount rate

Probability of meeting earnout and contingencies

3.3%-10.4%

75%-100%

7.8%

97%¹

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

Fair Value

as of

December 31,

2016

Assets

Liabilities

Valuation Technique

Unobservable Inputs

Range

Weighted

Average

Rate lock commitments

2,100

9,670

Discounted cash flow model and other observable market data

Counterparty credit risk

N/A

Forwards

17,824

—

Discounted cash flow model and other observable market data

Counterparty credit risk

N/A

Accounts payable, accrued and other liabilities:

Contingent consideration

—

66,004

Present value of

expected payments

Discount rate

Probability of meeting earnout and contingencies

3.3%-9.6%

75%-100%

6.5%

97%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 rate lock commitments, forwards, and 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 input used in the fair value of the Company’s rate lock commitments and forwards is the counterparty credit risk. 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 September 30, 2017 and December 31, 2016, the present value of expected payments related to the Company’s contingent consideration was $71.4 million and $66.0 million, respectively. The undiscounted value of the payments, assuming that all contingencies are met, would be $88.8 million and $81.3 million, respectively.