Derivatives

3 Months Ended

Mar. 31, 2019

Derivative Instruments And Hedging Activities Disclosure [Abstract]

11.	Derivatives

In the normal course of operations, the Company enters into derivative contracts. These derivative contracts primarily consist of foreign exchange swaps, foreign exchange/commodities options, futures and forwards. The Company enters into derivative contracts to facilitate client transactions, hedge principal positions and facilitate hedging activities of affiliated companies.

Derivative contracts can be exchange-traded or OTC. Exchange-traded derivatives typically fall within Level 1 or Level 2 of the fair value hierarchy depending on whether they are deemed to be actively traded or not. The Company generally values exchange-traded derivatives using their closing prices. OTC derivatives are valued using market transactions and other market evidence whenever possible, including market-based inputs to models, broker or dealer quotations or alternative pricing sources with reasonable levels of price transparency. For OTC derivatives that trade in liquid markets, such as forwards, swaps and options, model inputs can generally be verified and model selection does not involve significant management judgment. Such instruments are typically classified within Level 2 of the fair value hierarchy.

U.S GAAP guidance requires that an entity recognize all derivative contracts as either assets or liabilities in the unaudited condensed consolidated statements of financial condition and measure those instruments at fair value. The fair value of all derivative contracts is recorded on a net-by-counterparty basis where a legal right to offset exists under an enforceable netting agreement. Derivative contracts are recorded as part of “Receivables from broker-dealers, clearing organizations, customers and related broker-dealers” and “Payables to broker-dealers, clearing organizations, customers and related broker-dealers” in the Company’s unaudited condensed consolidated statements of financial condition.

The fair value of derivative contracts, computed in accordance with the Company’s netting policy, is set forth below (in thousands):

	March 31, 2019						December 31, 2018
Derivative contract	Assets		Liabilities		Notional Amounts¹		Assets		Liabilities		Notional Amounts¹
Foreign exchange/commodities options	$	—	$	42	$	4,557	$	39	$	88,016	$	4,745,428
Forwards		28		171		93,470		236		639		79,008
Foreign exchange swaps		2,594		2,092		1,001,289		1,611		2,072		482,295
Futures		331		231		13,048,985		93		402		13,067,925
Total	$	2,953	$	2,536	$	14,148,301	$	1,979	$	91,129	$	18,374,656

¹	Notional amounts represent the sum of gross long and short derivative contracts, an indication of the volume of the Company’s derivative activity and does not represent anticipated losses.

Certain of the Company’s foreign exchange swaps are with Cantor. See Note 13—“Related Party Transactions,” for additional information related to these transactions.

The replacement cost of contracts in a gain position were $3.0 million and $2.0 million, as of March 31, 2019, and December 31, 2018, respectively.

The following tables present information about the offsetting of derivative instruments as of March 31, 2019 and December 31, 2018 (in thousands):

	March 31, 2019
						Net Amounts Presented in the		Gross Amounts Not Offset
	Gross Amounts		Gross Amounts Offset			Statements of Financial Condition		Financial Instruments		Cash Collateral Received		Net Amounts
Assets
Forwards	$	33	$	(5	)	$	28	$	—	$	—	$	28
Foreign exchange swaps		3,555		(961	)		2,594		—		—		2,594
Futures		9,736		(9,405	)		331		—		—		331
Total	$	13,324	$	(10,371	)	$	2,953	$	—	$	—	$	2,953
Liabilities
Foreign exchange/commodities options	$	42	$	—		$	42	$	—	$	—	$	42
Forwards		176		(5	)		171		—		—		171
Foreign exchange swaps		3,053		(961	)		2,092		—		—		2,092
Futures		9,636		(9,405	)		231		—		—		231
Total	$	12,907	$	(10,371	)	$	2,536	$	—	$	—	$	2,536

	December 31, 2018
						Net Amounts Presented in the		Gross Amounts Not Offset
	Gross Amounts		Gross Amounts Offset			Statements of Financial Condition		Financial Instruments		Cash Collateral Received		Net Amounts
Assets
Foreign exchange/commodities options	$	482,751	$	(482,712	)	$	39	$	—	$	—	$	39
Forwards		253		(17	)		236		—		—		236
Foreign exchange swaps		1,938		(327	)		1,611		—		—		1,611
Futures		57,479		(57,386	)		93		—		—		93
Total	$	542,421	$	(540,442	)	$	1,979	$	—	$	—	$	1,979
Liabilities
Foreign exchange/commodities options	$	570,728	$	(482,712	)	$	88,016	$	—	$	—	$	88,016
Foreign exchange swaps		2,399		(327	)		2,072		—		—		2,072
Forwards		656		(17	)		639		—		—		639
Futures		57,788		(57,386	)		402		—		—		402
Total	$	631,571	$	(540,442	)	$	91,129	$	—	$	—	$	91,129

The change in fair value of derivative contracts is reported as part of “Principal transactions” in the Company’s unaudited condensed consolidated statements of operations. The change in fair value of equity options related to marketable securities is included as part of “Other income (loss)” in the Company’s unaudited condensed consolidated statements of operations.

The table below summarizes gains and losses on derivative contracts for the three months ended March 31, 2019 and 2018 (in thousands):

	Three Months Ended March 31,
Derivative contract	2019			2018
Foreign exchange/commodities options	$	63		$	4,599
Futures		4,248			5,908
Forwards		(113	)		292
Foreign exchange swaps		594			378
Equity options		—			102
Interest rate swaps		—			(5	)
Gain (loss)	$	4,792		$	11,274