Fair Value of Financial Instruments (Tables)

9 Months Ended

Sep. 30, 2013

Financial Assets and Liabilities Measured at Fair Value on Recurring Basis

The following fair value hierarchy table presents information about the Company’s financial assets and liabilities measured at fair value (in thousands):



	Assets and Liabilities Measured at Fair Value on a Recurring Basis
September 30, 2013	Level 1		Level 2		Level 3		Total
Assets
Financial instruments owned, at fair value:
Equities ⁽¹⁾	$	2,156,466	$	—	$	—	$	2,156,466
Listed options	288,227		—		—		288,227
U.S. government and Non-U.S. government obligations	32,678		—		—		32,678
Corporate debt	46,606		—		—		46,606
Total Financial instruments owned, at fair value	2,523,977		—		—		2,523,977

Securities on deposit with clearing organizations ⁽²⁾	160,369		—		—		160,369
Deferred compensation investments ⁽³⁾	—		84		—		84
Investment in Deephaven Funds ⁽³⁾	—		1,430		—		1,430
Assets within discontinued operations:							—
Securitized HECM loan inventory ⁽⁴⁾	—		5,841,664		—		5,841,664
Loan inventory	—		177,674		—		177,674
Total fair value of financial instrument assets	$	2,684,346	$	6,020,852	$	—	$	8,705,198
Liabilities
Financial instruments sold, not yet purchased, at fair value:
Equities ⁽¹⁾	$	1,848,729	$	—	$	—	$	1,848,729
U.S. government obligations	29,441		—		—		29,441
Corporate debt	49,616		—		—		49,616
Listed options	229,721		—		—		229,721
Foreign currency forward contracts	—		5,431		—		5,431
Total Financial instruments sold, not yet purchased, at fair value	2,157,507		5,431		—		2,162,938
Liabilities within discontinued operations:
Liability to GNMA trusts, at fair value ⁽⁴⁾	—		5,803,859		—		5,803,859
Total fair value of financial instrument liabilities	$	2,157,507	$	5,809,290	$	—	$	7,966,797

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⁽¹⁾	Equities of $1.22 billion have been netted by their respective CUSIP number and their long and short positions.


⁽²⁾	Securities on deposit with clearing organizations consist of U.S. government obligations and are recorded within Receivable from brokers, dealers and clearing organizations on the Consolidated Statements of Financial Condition.


⁽³⁾	Deferred compensation investments and Investment in Deephaven Funds are included within Investments on the Consolidated Statements of Financial Condition.


⁽⁴⁾	Represents HECMs that have been securitized into HECM Mortgage Backed Securities (“HMBS”) where the securitization is not accounted for as a sale of the underlying HECMs. See Securitized HECM loan inventory below for full description.



	Assets and Liabilities Measured at Fair Value on a Recurring Basis
December 31, 2012	Level 1		Level 2		Level 3		Total
Assets
Financial instruments owned, at fair value:
Equities ⁽¹⁾	$	378,933	$	—	$	—	$	378,933
Listed options	92,305		—		—		92,305
U.S. government obligations and corporate bonds	68,765		—		—		68,765
Mutual funds - Bond Funds	114,872				—		114,872
Total Financial instruments owned, at fair value	654,875		—		—		654,875
Securities on deposit with clearing organizations	7,147				—		7,147
Investment - Knight preferred shares	199,632				—		199,632
Total fair value of financial instrument assets	$	861,654	$	—	$	—	$	861,654
Liabilities
Financial instruments sold, not yet purchased, at fair value:
Equities ⁽¹⁾	$	423,740	$	—	$	—	$	423,740
U.S. government obligations	19,056		—		—		19,056
Listed options	69,757		—		—		69,757
Total Financial instruments sold, not yet purchased, at fair value	512,553		—		—		512,553
Total fair value of financial instrument liabilities	$	512,553	$	—	$	—	$	512,553

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⁽¹⁾ Equities of $5.9 million have been netted by their respective CUSIP number and their long and short positions.

Fair Value of Derivative Instruments in Consolidated Statements of Financial Condition and Effect of Changes in Fair Value on Consolidated Statements of Operations

The following tables summarize the fair value of derivative instruments and futures contract trading activities in the Consolidated Statements of Financial Condition and the gains and losses included in the Consolidated Statements of Operations (fair value in thousands):



		September 30, 2013
	Financial Statements	Assets			Liabilities
	Location	Fair Value		Contracts	Fair Value		Contracts
Foreign currency
Futures contracts	Receivables from/Payables to brokers, dealers and clearing organizations	$	21	651	$	62	244
Forward contracts ⁽¹⁾	Financial instruments owned, at fair value	—		—	5,431		2
Forward contracts (1)	Receivables from/Payables to brokers, dealers and clearing organizations	331		1	—		—
Equity
Futures contracts	Receivables from/Payables to brokers, dealers and clearing organizations	1,442		3,059	595		1,046
Swap contracts	Receivables from/Payables to brokers, dealers and clearing organizations	230		1	—		—
Listed options	Financial instruments owned, at fair value	288,227		772,768	229,721		753,979
Fixed income
Futures contracts	Receivables from/Payables to brokers, dealers and clearing organizations	4,183		24,400	1,724		6,601
Commodity
Futures contracts	Receivables from/Payables to brokers, dealers and clearing organizations	732		2,278	1,478		3,565
Total		$	295,166	803,158	$	239,011	765,437

⁽¹⁾ Designated as hedging instrument



		December 31, 2012
	Financial Statements	Assets			Liabilities
	Location	Fair Value		Contracts	Fair Value		Contracts
Foreign currency
Futures contracts	Receivables from/Payables to brokers, dealers and clearing organizations	$	8	500	$	—	95
Forward contracts	Accrued expenses and other liabilities	—		—	110		1
Equity
Futures contracts	Receivables from/Payables to brokers, dealers and clearing organizations	498		1,027	70		234
Swap contracts	Receivables from/Payables to brokers, dealers and clearing organizations	570		1	—		—
Listed options	Financial instruments owned, at fair value	92,305		199,324	69,757		196,804
Fixed income
Futures contracts	Receivables from/Payables to brokers, dealers and clearing organizations	3,474		42,143	5,043		61,398
Commodity
Futures contracts	Receivables from/Payables to brokers, dealers and clearing organizations	428		1,385	410		1,824
Total		$	97,283	244,380	$	75,390	260,356

Fair Value of Derivative Instruments Gain Loss Recognized



		Gain (Loss) Recognized
	Financial Statements	For the three months ended September 30,
	Location	2013			2012
Derivative instruments not designated as hedging instruments:
Foreign currency
Futures contracts	Trading revenues, net	$	3,825		$	4,493
Equity
Futures contracts	Trading revenues, net	17,461			10,724
Swap contracts	Trading revenues, net	1,884			1,985
Listed options ⁽¹⁾	Trading revenues, net	17,044			24,582
Fixed income
Futures contracts	Trading revenues, net	22,008			15,557
Commodity
Futures contracts	Trading revenues, net	18,774			8,792
		$	80,996		$	66,133
Derivative instruments designated as hedging instruments:
Foreign exchange - forward contract	Accumulated other comprehensive (loss)	$	(4,948	)	$	—

⁽¹⁾

Realized gains and losses on listed equity options relate to the Company’s market making activities in such options. Such market making activities also comprise trading in the underlying equity securities with gains and losses on such securities generally offsetting the gains and losses reported in this table. Gains and losses on such equity securities are also included in Trading revenue, net on the Company’s Consolidated Statements of Operations.



		Gain (Loss) Recognized
	Financial Statements	For the nine months ended September 30,
	Location	2013			2012
Derivative instruments not designated as hedging instruments:
Foreign currency
Futures contracts	Trading revenues, net	$	9,243		$	16,446
Equity
Futures contracts	Trading revenues, net	44,125			62,241
Swap contracts	Trading revenues, net	10,755			5,007
Listed options ⁽¹⁾	Trading revenues, net	63,322			41,455
Fixed income
Futures contracts	Trading revenues, net	64,211			66,573
Commodity
Futures contracts	Trading revenues, net	44,053			26,065
		$	235,709		$	217,787
Derivative instruments designated as hedging instruments:
Foreign exchange - forward contract	Accumulated other comprehensive (loss)	$	(4,948	)	$	—

⁽¹⁾

Realized gains and losses on listed options relate to the Company’s market making activities in such options. Such market making activities also comprise trading in the underlying equity securities with gains and losses on such securities generally offsetting the gains and losses reported in this table. Gains and losses on such equity securities are also included in Trading revenue, net on the Company’s Consolidated Statements of Operations.

Gross amounts of recognized derivative assets and gross amounts of offsets in the Consolidated Statement of Condition

The gross amounts of assets and liabilities subject to netting and gross amounts offset in the Consolidated Statements of Financial Condition were as follows (in thousands):



September 30, 2013	Gross Amounts Recognized		Gross Amounts Offset in the Statements of Financial Condition		Net Amounts of Assets Presented in the Statements of Financial Condition		Gross Amounts Not Offset in the Statement of Financial Condition				Net Amount
							Financial Instruments		Cash Collateral Received
							Financial Instruments		Cash Collateral Received
Assets
Listed options	$	288,227	$	—	$	288,227	$	—	$	—	$	288,227
Securities borrowed	1,370,921		—		1,370,921		1,329,508		—		41,413
Total Assets	$	1,659,148	$	—	$	1,659,148	$	1,329,508	$	—	$	329,640
Liabilities
Listed options	$	229,722	$	—	$	229,722	$	—	$	5,064	$	224,658
Securities loaned	543,451		—		543,451		533,266		—		10,185
Financial instruments sold under agreements to repurchase	595,029		—		595,029		595,022		—		7
Foreign currency forward contracts	5,431		—		5,431		—		—		5,431
Total Liabilities	$	1,373,633	$	—	$	1,373,633	$	1,128,288	$	5,064	$	240,281



December 31, 2012	Gross Amounts Recognized		Gross Amounts Offset in the Statements of Financial Condition		Net Amounts of Assets Presented in the Statements of Financial Condition		Gross Amounts Not Offset in the Statement of Financial Condition				Net Amount
							Financial Instruments		Cash Collateral Received
							Financial Instruments		Cash Collateral Received
Assets
Listed options	$	92,305	$	—	$	92,305	$	—	$	—	$	92,305
Securities borrowed	52,261		—		52,261		50,717				1,544
Total Assets	$	144,566	$	—	$	144,566	$	50,717	$	—	$	93,849
Liabilities
Listed options	$	69,757	$	—	$	69,757	$	—	$	1,393	$	68,364
Total Liabilities	$	69,757	$	—	$	69,757	$	—	$	1,393	$	68,364

- Definition

Tabular disclosure of the location and fair value amounts of derivative instruments (and nonderivative instruments that are designated and qualify as hedging instruments) reported in the statement of financial position.

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