Fair Value Measurements

9 Months Ended

Sep. 30, 2023

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 September 30, 2023
Assets
Money market funds	$	6,293	$	—	$	—	$	6,293
Securities available-for-sale
Corporate debt		—		24,546		—		24,546
Trading securities
U.S. Treasuries		—		98,711		—		98,711
Mutual funds held in rabbi trust		—		9,587		—		9,587
Total assets	$	6,293	$	132,844	$	—	$	139,137

Liabilities
Foreign currency forward position	$	—	$	2,852	$	—	$	2,852

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 available-for-sale and trading securities are included in investments, at fair value 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. In May 2023, the Company made final payment on the remaining contingent consideration. The following table summarizes the change in the Company's Level 3 liabilities for the nine months ended September 30, 2023:


	December 31, 2022		Payments			Realized (Gain)/Loss		September 30, 2023
	(In thousands)
Contingent consideration payable	$	12,340	$	(12,500	)	$	160	$	—

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 September 30, 2023
Financial assets not measured at fair value:
Cash	$	414,204	$	414,204	$	414,204	$	—	$	—	$	414,204
Cash segregated under federal regulations		52,601		52,601		52,601		—		—		52,601
Accounts receivable, net of allowance		90,548		90,548		—		90,548		—		90,548
Receivables from broker-dealers, clearing organizations and customers		548,081		548,081		112,489		435,592		—		548,081
Total	$	1,105,434	$	1,105,434	$	579,294	$	526,140	$	—	$	1,105,434

Financial liabilities not measured at fair value:
Payables to broker-dealers, clearing organizations and customers	$	364,086	$	364,086	$	—	$	364,086	$	—	$	364,086

As of December 31, 2022
Financial assets not measured at fair value:
Cash	$	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 and nine months ended September 30, 2023, 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
	September 30, 2023			December 31, 2022
	(In thousands)
Notional value	$	63,870		$	62,160
Fair value of notional		61,018			60,472
Fair value of the (liability)	$	(2,852	)	$	(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 net realized gain of $0.8 million and a net unrealized loss of $3.5 million for the three months ended September 30, 2023. The Company recorded a net realized gain of $0.7 million and a net unrealized loss of $1.2 million for the nine months ended September 30, 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 September 30, 2023, the Company maintained a collateral deposit of $3.2 million 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 September 30, 2023
Securities available-for-sale
Corporate debt	$	24,791	$	14	$	(259	)	$	24,546
Trading securities
U.S. Treasuries		99,211		—		(500	)		98,711
Mutual funds held in rabbi trust		10,442		79		(934	)		9,587
Total investments	$	134,444	$	93	$	(1,693	)	$	132,844

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

Purchases of investments during the nine months ended September 30, 2023 were $77.7 million. Proceeds from the sales and maturities of investments during the nine months ended September 30, 2023 were $28.3 million.

The following table summarizes the Company’s unrealized and realized gains and losses on investments:


	Three Months Ended September 30,						Nine Months Ended September 30,
	2023			2022			2023			2022
	(In thousands)
Unrealized gains/(losses)
Securities available-for-sale
Corporate debt	$	(22	)	$	—		$	(245	)	$	—
Trading securities
U.S. Treasuries		(154	)		—			(500	)		(445	)
Mutual funds held in rabbi trust		(200	)		(496	)		905			(2,618	)
Total investments	$	(376	)	$	(496	)	$	160		$	(3,063	)

Realized gains/(losses)
Securities available-for-sale
Corporate debt	$	—		$	—		$	(17	)	$	—
Trading securities
Mutual funds held in rabbi trust		(79	)		—			(138	)		—
Total investments	$	(79	)	$	—		$	(155	)	$	—

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 September 30, 2023
Securities available-for-sale
Corporate debt	$	8,948	$	15,598	$	24,546
Trading securities
U.S. Treasuries		—		98,711		98,711
Mutual funds held in rabbi trust		9,587		—		9,587
Total	$	18,535	$	114,309	$	132,844

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

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 September 30, 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 September 30, 2023
Corporate debt	$	22,468	$	(259	)	$	—	$	—	$	22,468	$	(259	)

During the three and nine months ended September 30, 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.

- Definition

The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

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