Financial instruments with Off-Balance Sheet Risk and Concentrations of Credit Risk

12 Months Ended

Dec. 31, 2015

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Financial instruments with Off-Balance Sheet Risk and Concentrations of Credit Risk

Derivative Financial Instruments

The Company enters into derivative transactions as part of its trading activities and to manage foreign currency exposure. Cash flows associated with such derivative activities are included in cash flows from operating activities on the Consolidated Statements of Cash Flows.

During the normal course of business, the Company enters into futures contracts. These financial instruments are subject to varying degrees of risks whereby the fair value of the securities underlying the financial instruments, may be in excess of, or less than, the contract amount. The Company is obligated to post collateral against certain futures contracts.

The amounts and positions included in the tables below for futures contracts would be classified as Level 1 while swaps and forward contracts would be classified as Level 2 in the fair value hierarchy.

The following tables summarize the fair value and number of derivative instruments held at December 31, 2015 and December 31, 2014 and the gains and losses included in the Consolidated Statements of Operations for the periods then ended. These instruments include those classified as Financial Instruments, owned at fair value, Financial instruments sold, not yet purchased at fair value, as well as futures contracts which are reported within Receivable from or Payable to brokers, dealers and clearing organizations in the Consolidated Statements of Financial Condition (fair value and gain (loss) in thousands):

		December 31, 2015
	Financial Statements	Assets			Liabilities
	Location	Fair Value		Contracts	Fair Value		Contracts
Foreign currency
Futures contracts	Receivable from/Payable to brokers, dealers and clearing organizations	$	578	3,675	$	955	6,586
Forward contracts	Financial instruments owned, at fair value	445		1	—		—
Equity
Futures contracts	Receivable from/Payable to brokers, dealers and clearing organizations	1,558		4,038	1,743		3,432
Swap contracts	Receivable from brokers, dealers and clearing organizations	—		—	281		2
Listed options	Financial instruments owned/sold, not yet purchased, at fair value	178,360		360,469	151,893		390,949
Fixed income
Futures contracts	Receivable from/Payable to brokers, dealers and clearing organizations	4,265		6,195	4,037		4,891
Commodity
Futures contracts	Receivable from/Payable to brokers, dealers and clearing organizations	35,441		22,424	35,814		24,261
Total		$	220,647	396,802	$	194,723	430,121

		December 31, 2014
	Financial Statements	Assets			Liabilities
	Location	Fair Value		Contracts	Fair Value		Contracts
Foreign currency
Futures contracts	Receivable from/Payable to brokers, dealers and clearing organizations	$	1,212	8,108	$	651	9,090
Forward contracts	Financial instruments owned, at fair value	60		1	—		—
Equity
Futures contracts	Receivable from/Payable to brokers, dealers and clearing organizations	1,790		2,590	2,047		3,085
Swap contracts	Receivable from/Payable to brokers, dealers and clearing organizations	98		1	13		1
Listed options	Financial instruments owned/sold, not yet purchased, at fair value	144,586		426,747	115,362		437,383
Fixed income
Futures contracts	Receivable from/Payable to brokers, dealers and clearing organizations	6,432		11,901	6,891		10,628
Commodity
Futures contracts	Receivable from/Payable to brokers, dealers and clearing organizations	15,245		8,894	14,847		9,105
Total		$	169,423	458,242	$	139,811	469,292

		Gain (Loss) Recognized
	Financial Statements	For the year ended December 31,
	Location	2015			2014			2013
Derivative instruments not designated as hedging instruments:
Foreign currency
Futures contracts	Trading revenues, net	$	4,273		$	10,535		$	12,191
Forward contracts	Investment income and other, net	(10		)	526			—
Equity
Futures contracts	Trading revenues, net	30,479			25,247			50,073
Swap contracts	Trading revenues, net	3,789			5,277			11,736
Listed options (1)	Trading revenues, net	(14,278		)	(37,439		)	37,035
Fixed income
Futures contracts	Trading revenues, net	37,710			31,277			80,511
Commodity
Futures contracts	Trading revenues, net	48,604			55,295			62,215
		$	110,567		$	90,718		$	253,761
Derivative instruments designated as hedging instruments:
Foreign exchange - forward contract	Accumulated other comprehensive income	$	208		$	—		$	(3,298	)

⁽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 revenues, net on the Company’s Consolidated Statements of Operations.

The Company has entered into and may continue to enter into International Swaps and Derivative Association, Inc. (“ISDA”) master netting agreements with counterparties. Master agreements provide protection in bankruptcy in certain circumstances and, where legally enforceable, enable receivables and payables with the same counterparty to be settled or otherwise eliminated by applying amounts due against all or a portion of an amount due from the counterparty or a third party. The Company may also enter into bilateral trading agreements and other customer agreements that provide for the netting of receivables and payables with a given counterparty as a single net obligation.

Under the ISDA master netting agreements, the Company typically also executes credit support annexes, which provide for collateral, either in the form of cash or securities, to be posted or paid by a counterparty based on the fair value of the derivative receivable or payable based on the rates and parameters established in the credit support annex. In the event of counterparty’s default, provisions of the ISDA master agreement permit acceleration and termination of all outstanding transactions covered by the agreement such that a single amount is owed by, or to, the non-defaulting party. Any collateral posted can be applied to the net obligations, with any excess returned and the collateralized party has a right to liquidate the collateral. Any residual claim after netting is treated along with other unsecured claims in bankruptcy court.

The Company is also a party to clearing agreements with various central clearing parties. Under these arrangements, the central clearing counterparty facilitates settlement between counterparties based on the net payable owed or receivable due and, with respect to daily settlement, cash is generally only required to be deposited to the extent of the net amount. In the event of default, a net termination amount is determined based on the market values of all outstanding positions and the clearing organization or clearing member provides for the liquidation and settlement of the net termination amount among all counterparties to the open derivative contracts.

The table below provides information regarding (1) the extent to which, under enforceable master netting arrangements, such balances are presented net in the Consolidated Statements of Financial Condition as appropriate under GAAP and (2) the extent to which other rights of offset associated with these arrangements exist and could have had an effect on our financial position (in thousands):

December 31, 2015	Gross Amounts Recognized		Gross Amounts Offset in the Statements of Financial Condition		Net Amounts Presented in the Statements of Financial Condition		Gross Amounts Not Offset in the Statement of Financial Condition				Net Amount
							Available Collateral(1)		Counterparty Netting(2)
Assets
Listed options	$	178,360	$	—	$	178,360	$	—	$	—	$	178,360
Foreign currency forward contracts	445		—		445		—		—		445
Futures	41,842		41,146		696		—		—		696
Total Assets	$	220,647	$	41,146	$	179,501	$	—	$	—	$	179,501
Liabilities
Listed options	$	151,893	$	—	$	151,893	$	—	$	—	$	151,893
Futures (3)	42,549		42,549		—		—		—		—
Swaps	281		281		—		—		—		—
Total Liabilities	$	194,723	$	42,830	$	151,893	$	—	$	—	$	151,893

⁽¹⁾ Includes securities received or delivered under collateral arrangements with counterparties that could be liquidated in the event of a counterparty default and thus offset against a counterparty's rights and obligations under the respective repurchase agreements or securities borrowing or lending arrangements.

⁽²⁾ Under master netting agreements with its counterparties, the Company has the legal right of offset with a counterparty, which incorporates all of the counterparty's outstanding rights and obligations under the arrangement.  These balances reflect additional credit risk mitigation that is available by counterparty in the event of a counterparty's default, but which are not netted in the Statement of Financial Condition because other netting provisions under U.S. GAAP are not met.

⁽³⁾ The full amount of the liabilities related to futures of $42.5 million has been netted against assets related to futures of $6.1 million and margin posted by the Company at the clearing broker in excess of the net liability of $36.4 million.

December 31, 2014	Gross Amounts Recognized		Gross Amounts Offset in the Statements of Financial Condition		Net Amounts Presented in the Statements of Financial Condition		Gross Amounts Not Offset in the Statement of Financial Condition				Net Amount
							Available Collateral(1)		Counterparty Netting(2)
Assets
Listed options	$	144,586	$	—	$	144,586	$	—	$	—	$	144,586
Foreign currency forward contracts	60		—		60		—		—		60
Swaps	98		13		85		—		—		85
Futures	24,679		24,436		243		—		—		243
Total Assets	$	169,423	$	24,449	$	144,974	$	—	$	—	$	144,974
Liabilities
Listed options	$	115,362	$	—	$	115,362	$	—	$	17,359	$	98,003
Futures	24,436		24,436		—		—		—		—
Swaps	13		13		—		—		—		—
Total Liabilities	$	139,811	$	24,449	$	115,362	$	—	$	17,359	$	98,003

⁽¹⁾ Includes securities received or delivered under collateral arrangements with counterparties that could be liquidated in the event of a counterparty default and thus offset against a counterparty's rights and obligations under the respective repurchase agreements or securities borrowing or lending arrangements.

⁽²⁾ Under master netting agreements with its counterparties, the Company has the legal right of offset with a counterparty, which incorporates all of the counterparty's outstanding rights and obligations under the arrangement.  These balances reflect additional credit risk mitigation that is available by counterparty in the event of a counterparty's default, but which are not netted in the Statement of Financial Condition because other netting provisions under U.S. GAAP are not met.

Financial instruments with Off-Balance Sheet Risk and Concentrations of Credit Risk

As a market maker in global equities, fixed income, futures, options, commodities and currencies, the majority of the Company’s securities transactions are conducted as principal or riskless principal with broker dealers and institutional counterparties primarily located in the United States. The Company self-clears substantially all of its U.S. equity and option securities transactions. The Company clears a portion of its securities transactions through third party clearing brokers. Foreign transactions are settled pursuant to global custody and clearing agreements with major U.S. banks. Substantially all of the Company’s credit exposures are concentrated with its clearing brokers, broker dealer and institutional counterparties. The Company’s policy is to monitor the credit standing of counterparties with which it conducts business.

Financial instruments sold, not yet purchased, at fair value represent obligations to purchase such securities (or underlying securities) at a future date. The Company may incur a loss if the market value of the securities subsequently increases.

The Company currently has no loans outstanding to any former or current executive officer or director.