Fair Value Measurements

3 Months Ended

Mar. 31, 2023

Fair Value Disclosures [Abstract]

Fair Value Measurements

4. Fair Value Measurements

The following table summarizes the valuation of the Company’s assets and liabilities measured at fair value as categorized based on the hierarchy described in Note 2:

	Level 1		Level 2		Level 3		Total
	(In thousands)
As of March 31, 2023
Assets
Money market funds	$	35,504	$	—	$	—	$	35,504
Securities available-for-sale
Corporate debt		—		21,832		—		21,832
Trading securities
U.S. Treasuries		—		74,829		—		74,829
Mutual funds held in rabbi trust		—		10,013		—		10,013
Foreign currency forward position		—		814		—		814
Total assets	$	35,504	$	107,488	$	—	$	142,992
Liabilities
Contingent consideration payable	$	—	$	—	$	12,447	$	12,447
Total liabilities	$	—	$	—	$	12,447	$	12,447
As of December 31, 2022
Assets
Money market funds	$	59,173	$	—	$	—	$	59,173
Trading securities
U.S. Treasuries		—		74,409		—		74,409
Mutual funds held in rabbi trust		—		9,383		—		9,383
Total assets	$	59,173	$	83,792	$	—	$	142,965
Liabilities
Contingent consideration payable	$	—	$	—	$	12,340	$	12,340
Foreign currency forward position		—		1,688		—		1,688
Total liabilities	$	—	$	1,688	$	12,340	$	14,028

Money market funds are included in cash and cash equivalents on the Consolidated Statements of Financial Condition. Securities classified within Level 2 were valued using a market approach utilizing prices and other relevant information generated by market transactions involving comparable assets. The foreign currency forward contracts are classified within Level 2 as the valuation inputs are based on quoted market prices. The mutual funds held in a rabbi trust represent investments associated with the Company’s deferred cash incentive plan.

Liabilities classified within Level 3 reflect contingent consideration payable recognized in connection with acquisitions. Significant unobservable inputs used in the valuation of contingent consideration payable include estimates of client retention, electronic trading volume and variable fees over periods of 18 to 24 months from the acquisition dates. The following table summarizes the change in the Company's Level 3 liabilities for the three months ended March 31, 2023:

	December 31, 2022		Unrealized (Gain)/Loss		March 31, 2023
	(In thousands)
Contingent consideration payable	$	12,340	$	107	$	12,447

The table below presents the range and average significant unobservable inputs used in the valuation of the Company's Level 3 liabilities:

	Valuation Technique	Unobservable Inputs	Range		Average
	($ in thousands)
As of March 31, 2023
Contingent consideration payable	Discounted cash flows	Present value factor	0.99			0.99
		April 2022-March 2023 variable fee	$	3,796	$	3,796
		Percentage of electronic trading volume	86.0% - 96.6%		91.3%
As of December 31, 2022
Contingent consideration payable	Discounted cash flows	Present value factor	0.99			0.99
		April 2022-March 2023 variable fee	$3,556 - $5,658		$4,607
		Percentage of electronic trading volume	86.0% - 96.6%		91.3%

The table below presents the carrying value, fair value and fair value hierarchy category of the Company's financial assets and liabilities that are not measured at fair value on the Consolidated Statements of Financial Condition. The carrying values of the Company's financial assets and liabilities not measured at fair value categorized in the fair value hierarchy as Level 1 and Level 2 approximate fair value due to the short-term nature of the underlying assets and liabilities.

	Carrying Value		Fair Value		Level 1		Level 2		Level 3		Total
	(In thousands)
As of March 31, 2023
Financial assets not measured at fair value:
Cash and cash equivalents	$	332,780	$	332,780	$	332,780	$	—	$	—	$	332,780
Cash segregated under federal regulations		51,459		51,459		51,459		—		—		51,459
Accounts receivable, net of allowance		100,184		100,184		—		100,184		—		100,184
Receivables from broker-dealers, clearing    organizations and customers		558,254		558,254		118,293		439,961		—		558,254
Total	$	1,042,677	$	1,042,677	$	502,532	$	540,145	$	—	$	1,042,677
Financial liabilities not measured at fair value:
Payables to broker-dealers, clearing    organizations and customers	$	316,274	$	316,274	$	—	$	316,274	$	—	$	316,274
As of December 31, 2022
Financial assets not measured at fair value:
Cash and cash equivalents	$	371,573	$	371,573	$	371,573	$	—	$	—	$	371,573
Cash segregated under federal regulations		50,947		50,947		50,947		—		—		50,947
Accounts receivable, net of allowance		78,450		78,450		—		78,450		—		78,450
Receivables from broker-dealers, clearing    organizations and customers		476,335		476,335		88,923		387,412		—		476,335
Total	$	977,305	$	977,305	$	511,443	$	465,862	$	—	$	977,305
Financial liabilities not measured at fair value:
Payables to broker-dealers, clearing    organizations and customers	$	303,993	$	303,993	$	—	$	303,993	$	—	$	303,993

During the three months ended March 31, 2023 and 2022, there were no transfers between Level 1, Level 2 and Level 3 securities.

The Company enters into foreign currency forward contracts as an economic hedge against certain foreign currency transaction gains and losses in the Consolidated Statements of Operations. These forward contracts are for one- or three-month periods and are used to limit exposure to foreign currency exchange rate fluctuations. The Company records the fair value of the asset in prepaid expenses and other assets or the fair value of the liability in accounts payable, accrued expenses and other liabilities in the Consolidated Statements of Financial Condition. The following table summarizes the Company’s foreign currency forward position:

	As of
	March 31, 2023		December 31, 2022
	(In thousands)
Notional value	$	60,920	$	62,160
Fair value of notional		61,734		60,472
Fair value of the asset (liability)	$	814	$	(1,688	)

Realized and unrealized gains and losses on foreign currency forward contracts are included in other, net in the Consolidated Statements of Operations. The Company recorded a realized loss of $1.7 million and an unrealized gain of $2.5 million for the three months ended March 31, 2023. The Company records collateral deposits with its counterparty bank in prepaid expenses and other assets on the Consolidated Statements of Financial Condition. As of March 31, 2023, the Company did not maintain a collateral deposit with its counterparty bank.

The following table summarizes the Company’s investments:

	Amortized cost		Gross unrealized gains		Gross unrealized losses			Fair value
	(In thousands)
As of March 31, 2023
Securities available-for-sale
Corporate debt	$	21,887	$	25	$	(80	)	$	21,832
Trading securities
U.S. Treasuries		74,409		420		—			74,829
Mutual funds held in rabbi trust		9,428		585		—			10,013
Total investments	$	105,724	$	1,030	$	(80	)	$	106,674
As of December 31, 2022
Trading securities
U.S. Treasuries	$	74,943	$	—	$	(534	)	$	74,409
Mutual funds held in rabbi trust		11,474		—		(2,091	)		9,383
Total investments	$	86,417	$	—	$	(2,625	)	$	83,792

The following table summarizes the fair value of the investments based upon the contractual maturities:

	Less than one year		Due in 1 - 5 years		Total
	(In thousands)
As of March 31, 2023
Securities available-for-sale
Corporate debt	$	5,809	$	16,023	$	21,832
Trading securities
U.S. Treasuries		24,923		49,906		74,829
Mutual funds held in rabbi trust		10,013		—		10,013
Total	$	40,745	$	65,929	$	106,674
As of December 31, 2022
Trading securities
U.S. Treasuries	$	24,618	$	49,791	$	74,409
Mutual funds held in rabbi trust		9,383		—		9,383
Total	$	34,001	$	49,791	$	83,792

Proceeds from the sales and maturities of investments during the three months ended March 31, 2023 were $1.0 million. Net realized losses on available-for-sale securities were less than $0.1 million for the three months ended March 31, 2023. Net unrealized losses on available-for-sale securities were $0.1 million for the three months ended March 31, 2023. Net unrealized gains on trading securities were $1.0 million for the three months ended March 31, 2023. Net unrealized losses on trading securities were $1.0 million for the three months ended March 31, 2022.

The following table provides fair values and unrealized losses on the Company’s available-for-sale investments and the aging of securities’ continuous unrealized loss position as of March 31, 2023:

	Less than Twelve Months					Twelve Months or More				Total
	Fair value		Gross unrealized losses			Fair value		Gross unrealized losses		Fair value		Gross unrealized losses
	(In thousands)
As of March 31, 2023
Corporate debt	$	15,253	$	(80	)	$	—	$	—	$	15,253	$	(80	)

During the three months ended March 31, 2023 the Company did not recognize any credit losses on its available-for-sale securities. The unrealized losses on securities are due to changes in interest rates and market liquidity.