The Company's financial instruments are recorded within the Consolidated Statements of Financial Condition at fair value. ASC 820 defines fair value as the price that would be received upon the sale of an asset or paid upon the transfer of a liability (i.e., the "exit price") in an orderly transaction between market participants at the measurement date and establishes a hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available. Observable inputs are inputs that market participants would use in pricing the asset or liability based on market data obtained from sources independent of the Company. Unobservable inputs are inputs that reflect the Company's assumptions about the assumptions market participants would use in pricing the asset or liability based on the best information available in the circumstances. The hierarchy is broken down into three levels based on the reliability of inputs as follows:

The availability of observable inputs can vary from product to product and is affected by a wide variety of factors, including, for example, the type of product, whether the product is new and not yet established in the marketplace, and other characteristics particular to the transaction. To the extent that valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment. Accordingly, the degree of judgment exercised by management in determining fair value is greatest for instruments categorized in Level 3. In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, for disclosure purposes, the level in the fair value hierarchy within which the fair value measurement in its entirety falls is determined based on the lowest level input that is significant to the fair value measurement in its entirety.

ASC 820 also provides (i) general guidance on determining fair value when markets are inactive including the use of judgment in determining whether a transaction in a dislocated market represents fair value, the inclusion of market participant risk adjustments when an entity significantly adjusts observable market data based on unobservable inputs, and the degree of reliance to be placed on broker quotes or pricing services as well as (ii) additional guidance for estimating fair value when the volume and level of activity for the asset or liability have significantly declined and guidance on identifying circumstances that indicate a transaction is not orderly.

Cash Equivalents—These financial assets represent cash in banks or cash invested in highly liquid investments with original maturities less than 90 days that are not segregated for regulatory purposes or held for sale in the ordinary course of business. These investments are valued at par, which represent fair value, and are considered Level 1. Refer to Note 3 "Cash and Cash Equivalents" for additional information.

Loans—These financial instruments primarily consist of residential mortgage loans originated by ClearPoint, for which the FVO has been elected, and are classified as Level 2 as there is no active quoted market for these loans. Fair value is determined utilizing observable market factors and is principally based upon the fair value of the "to-be-announced" ("TBA") forward securities market (Refer to "Derivatives" below).

Securities Owned/Securities Sold But Not Yet Purchased—These financial instruments primarily consist of investments in fixed income securities, as well as holdings in equity securities.

Fixed income securities include securities traded in active markets, such as U.S. government and federal agency obligations, agency mortgage-backed securities, corporate debt, preferred stock and certain asset and mortgage-backed securities. The on-the-run treasuries are generally traded in active, quoted and highly liquid markets and therefore are generally classified as Level 1. As there is no active quoted market for agency mortgage-backed securities, corporate debt, asset and mortgage-backed securities, and certain preferred stock, the Company utilizes observable market factors in determining fair value. These financial instruments are reported as Level 2. In certain circumstances, the Company may utilize unobservable inputs that reflect management's own assumptions about the assumptions market participants would make. These financial assets are reported as Level 3.

In determining fair value for Level 2 financial instruments, management considers benchmark yields, reported trades for comparable trade sizes, recent purchases or sales of the financial assets, issuer spreads, benchmark securities, bids and offers. These inputs relate either directly to the financial assets being evaluated or indirectly to a similar security (for example, another bond of the same issuer or a bond of a different issuer in the same industry with similar maturity, terms and conditions). Additionally, for certain mortgage-backed securities, management also considers various characteristics such as the issuer, underlying collateral, prepayment speeds, cash flows and credit ratings.

In determining fair value for Level 3 financial instruments, management maximizes the use of market observable inputs when available. Management utilizes factors such as bids that were received, recent purchases or sales of the financial assets, spreads to the yield curve on similar offered financial assets, or comparing spreads to similar financial assets that traded and had been priced through an independent pricing source. The Company generally does not use internally developed valuation models to determine fair value for any holdings other than commercial mortgage-backed securities positions. Management considers its valuation methodologies consistent with assumptions in how other market participants value certain financial assets. These methodologies involve management judgment and lead to a Level 3 classification.

Equity securities traded in active markets are valued at quoted market prices and are reported as Level 1 if they are not subject to legal restrictions on transfer and as Level 2 if they are so restricted. When quoted prices are not available, valuation models are applied to these financial assets. These valuation techniques involve some level of management estimation and judgment, the degree of which is dependent on the price transparency for the instruments or market and the instruments' complexity. Accordingly, these financial assets are reported as Level 3.

Derivatives—These financial instruments primarily consist of TBAs and IRLCs.

TBAs: In connection with mortgage-backed and U.S. government securities trading, and the mortgage lending activities of ClearPoint, the Company economically hedges certain exposures through the use of TBAs. A TBA is a forward mortgage-backed security whose collateral remains "to-be-announced" until just prior to the trade settlement. TBAs are traded in an active quoted market and therefore generally classified as Level 1.

IRLCs: The Company enters into mortgage loan IRLCs in connection with its mortgage lending activities. The fair value of the IRLCs are determined on an individual loan basis and are based on investor pricing tables stratified by product, note rate and term and considers the servicing release premium, expected loan origination fees and costs and loan pricing adjustments specific to each loan. The Company also applies an estimated rate of closure based on historical experience in determining the notional amount of the loans expected to be funded. All of these factors combined results in the classification of the IRLCs as Level 3.

Investments—These financial assets primarily represent the Company's investment in FA Technology Ventures, L.P. ("FATV" or "the Partnership"), a venture capital limited partnership which provides early stage growth capital to companies in the information and new energy technology sectors. Valuation techniques applied by FATV GP LLC (the "General Partner") to the underlying portfolio companies predominantly include consideration of comparable market transactions and the use of valuation models to determine the discounted value of estimated future cash flows, adjusted as appropriate for market and/or other risk factors. In addition, from time to time, FATV holds equity securities in public companies which are valued based upon quoted market prices. This investment is classified as Level 3 as the majority of the valuation techniques involve some level of management estimation and judgment, the degree of which is dependent on the price transparency for the instruments or market and the instruments' complexity.

The following table summarizes the categorization of the financial instruments within the fair value hierarchy including those for which the Company accounts for under the FVO at December 31, 2011:

	Assets at Fair Value

(In thousands)	Level 1		Level 2		Level 3		Total
Financial instruments owned
Agency mortgage-backed securities	$	—	$	1,084,254	$	1,367	$	1,085,621
Commercial mortgage-backed securities		—		—		38,154		38,154
U.S. Government and federal agency obligations		5,789		158,774		—		164,563
Other debt obligations		—		—		192		192
Loans		—		228,226		—		228,226
Preferred stock		316		—		1,301		1,617
Corporate debt securities		—		14,524		—		14,524
Residential mortgage-backed securities		—		—		18,419		18,419
Collateralized debt obligations		—		—		647		647
Equity securities		889		—		112		1,001
Derivatives		—		—		1,696		1,696
Investments		—		—		18,310		18,310

Total financial assets at fair value	$	6,994	$	1,485,778	$	80,198	$	1,572,970

	Liabilities at Fair Value

(In thousands)	Level 1		Level 2		Level 3		Total
Securities sold but not yet purchased
U.S. Government and federal agency obligations	$	158,059	$	11,796	$	—	$	169,855
Preferred stock		184		—		730		914
Corporate debt securities		—		12,254		—		12,254
Equity securities		2		—		—		2
Derivatives		1,971		—		—		1,971

Total financial liabilities at fair value	$	160,216	$	24,050	$	730	$	184,996

Included below is a discussion of the characteristics of certain of the Company's Level 2 and Level 3 holdings at December 31, 2011. Unless otherwise stated, fair value of Level 2 assets are determined based upon observable third party information including recent trading activity, broker quotes and other relevant market data as noted above. Fair value for Level 3 assets are based predominantly on management's own assumptions about the assumptions market participants would make. The Company generally does not utilize internally developed valuation models to determine fair value during the relevant reporting periods for any holdings other than commercial mortgage-backed securities positions and certain underlying portfolio companies comprising the Company's investment in FATV.

The Company's agency mortgage-backed securities positions classified as Level 2, of approximately $1.1 billion, have a weighted average loan size of approximately $0.2 million paying interest of 6.2%, with a weighted average FICO score of 700. This portfolio has a weighted average coupon remitting payment of 5.49% and has a weighted average annualized constant prepayment rate of approximately 19.0%. Fair value is determined through a combination of matrix pricing as well as the information noted in the preceding paragraph.

The Company's Level 2 net debt securities issued by U.S. Government and federal agency obligations of approximately $147.0 million have a weighted average coupon of 2.3% and a weighted average maturity of 2022.

The Company's Level 2 loans of approximately $228.2 million (unpaid principal of approximately $221.6 million), which are related to the mortgage lending activities of ClearPoint and for which the FVO has been elected, have a weighted average loan size of approximately $0.3 million and have a weighted average coupon remitting payment of 4.1%. Unrealized gains arising from fair value changes were approximately $0.6 million as of December 31, 2011 and have been recorded within Principal transactions within the Consolidated Statements of Operations. There are no loans 90 days or more past due and no loans are in non-accrual status. The loans are underwritten using standards prescribed by conventional mortgage lenders and loan buyers such as the Federal National Mortgage Association and Federal Home Loan Mortgage Corporation.

The Company's net holdings of corporate debt securities classified as Level 2 of approximately $2.3 million have a weighted average credit rating of BBB, have a weighted average issuance year of 2007 and a weighted average maturity of 2017.

The Company's Level 3 agency mortgage-backed securities positions of approximately $1.4 million have a weighted average loan size of $0.1 million paying interest of 6.8%, with a weighted average coupon of 5.5% and a weighted average vintage of 2007.

The Company's portfolio of Level 3 commercial mortgage backed securities of approximately $38.2 million are primarily mezzanine, have a weighted average credit rating of BBB and a weighted average vintage of 2006. Fair value is determined through the use of an internally developed valuation model which considers the performance of the underlying collateral, including defaults and loss severity experience.

The Company's portfolio of Level 3 non-agency residential mortgage backed securities of approximately $18.4 million are primarily mezzanine, have a weighted average credit rating of CCC and have experienced, on average, a weighted average default rate of 5.9% and 58.6% severity.

The Company's investments of approximately $18.3 million classified as Level 3 include the Company's investment in FATV of approximately $15.9 million. FATV invests primarily in equity securities of closely held private companies, but, from time to time, also holds equity securities in public companies. FATV is comprised of 22 holdings and fair value is determined based upon the nature of the underlying holdings. The Company has classified its entire investment as Level 3, as FATV is predominantly comprised of private companies.

Discussed further below are the valuation techniques applied to the Company's investments in both privately held and publicly held companies, including the Company's investment in FATV:

The Company's assets measured at fair value on a nonrecurring basis solely relate to Goodwill arising from various business combinations which would be classified as Level 3 within the fair value hierarchy. Refer to Note 11 for additional information, including changes in balances from prior reporting periods.

The following table summarizes the categorization of the financial instruments within the fair value hierarchy at December 31, 2010:

	Assets at Fair Value

(In thousands)	Level 1		Level 2		Level 3		Total
Financial instruments owned
Agency mortgage-backed securities	$	—	$	1,084,576	$	806	$	1,085,382
Commercial mortgage-backed securities		—		—		46,571		46,571
U.S. Government and federal agency obligations		35		47,546		—		47,581
Residential mortgage-backed securities		—		—		33,604		33,604
Collateralized debt obligations		—		—		23,235		23,235
Equity securities		14,212		—		60		14,272
Other debt obligations		—		8,200		5,843		14,043
Preferred stock		—		12,381		—		12,381
Corporate debt securities		—		4,037		—		4,037
Derivatives		137		—		—		137
Investments		—		—		18,084		18,084

Total financial assets at fair value	$	14,384	$	1,156,740	$	128,203	$	1,299,327

	Liabilities at Fair Value

(In thousands)	Level 1		Level 2		Level 3		Total
Securities sold but not yet purchased
U.S. Government and federal agency obligations	$	92,971	$	—	$	—	$	92,971
Preferred stock		—		2,469		—		2,469
Corporate debt securities		—		1,004		—		1,004
Equity securities		13,148		—		—		13,148
Derivatives		2,683		—		—		2,683

Total financial liabilities at fair value	$	108,802	$	3,473	$	—	$	112,275

Included below is a discussion of the characteristics of certain of the Company's Level 2 and Level 3 holdings at December 31, 2010. Unless otherwise stated, fair value of Level 2 assets are determined based upon observable third party information including recent trading activity, broker quotes and other relevant market data as noted above. Fair value for Level 3 assets are based predominantly on management's own assumptions about the assumptions market participants would make. The Company generally does not utilize internally developed valuation models to determine fair value during the relevant reporting periods for any holdings other than certain underlying portfolio companies comprising the Company's investment in FATV.

The Company's agency mortgage-backed securities positions classified as Level 2, of approximately $1.1 billion, have a weighted average loan size of approximately $0.2 million paying interest of 6.4%, with a weighted average FICO score of 719. This portfolio has a weighted average coupon remitting payment of 5.62% and has a weighted average annualized constant prepayment rate of approximately 25%. Fair value is determined through a combination of matrix pricing as well as the information noted in the preceding paragraph.

The Company's Level 2 debt securities issued by U.S. Government and federal agency obligations of approximately $47.5 million have a weighted average coupon of 4.76% and a weighted average maturity of 2021.

The Company's other debt obligations reported as Level 2 include holdings of approximately $8.2 million asset backed securities, paying floating interest rates currently at less than 1%, with a weighted average credit rating of CC, and a weighted average vintage of 2006.

The Company's preferred stock holdings of approximately $12.4 million have a weighted average coupon of 8.06% and a weighted average credit rating of BBB.

The Company's holdings of corporate debt securities classified as Level 2 of approximately $4.0 million have a weighted average credit rating of B, have a weighted average issuance year of 2007 and a weighted average maturity of 2018.

The Company's Level 3 agency mortgage-backed securities positions of approximately $0.8 million have a weighted average loan size of $0.3 million paying interest of 5.06%, with a weighted average coupon of 4.30% and a weighted average vintage of 2009.

The Company's portfolio of Level 3 commercial mortgage backed securities of approximately $46.6 million are primarily mezzanine, have a weighted average credit rating of BB and a weighted average vintage of 2006.

The Company's portfolio of Level 3 non-agency residential mortgage backed securities of approximately $33.6 million are primarily mezzanine, have a weighted average credit rating of CC and have experienced, on average, a weighted average default rate of 2.46% and 47.95% severity.

The Company's portfolio of Level 3 collateralized debt obligations of $23.2 million are comprised of commercial real estate, with a weighted average vintage of 2005, have a weighted average credit rating of BB and have on average 5.75% subordination.

The Company's other debt obligations reported as Level 3 include holdings of approximately $5.8 million asset backed securities, paying floating interest rates currently at less than 2%, with a weighted average credit rating of AAA, and a weighted average vintage of 2008.

The Company's investments of approximately $18.1 million classified as Level 3 include the Company's investment in FATV of approximately $16.8 million. FATV invests primarily in equity securities of closely held private companies, and also holds equity securities in public companies which are generally subject to legal restrictions on transfer. FATV is comprised of approximately 30 holdings and fair value is determined based upon the nature of the underlying holdings. The Company has classified its entire investment as Level 3, as FATV is predominantly comprised of private companies.

The Company reviews its financial instrument classification on a quarterly basis. As the observability and strength of valuation attributes change, the Company may reclassify certain financial assets or liabilities between levels. The Company's policy is to utilize an end-of-period convention for determining transfers in or out of Levels 1, 2 and 3. During the year ended December 31, 2011, there were no transfers between Levels 1 and 2.

The following table summarizes the changes in the Company's Level 3 financial instruments for the year ended December 31, 2011:

(In thousands)	Balance at December 31, 2010		Total gains or (losses) (realized and unrealized)(1)			Purchases		Sales			Settlements			Transfers in and/or out of Level 3		Balance at December 31, 2011		Changes in unrealized gains/(losses) on Level 3 assets still held at the reporting date(1)

Commercial mortgage-backed securities	$	46,571	$	4,745		$	79,432	$	(92,425	)	$	(169	)	$	—	$	38,154	$	(10,820	)
Residential mortgage-backed securities		33,604		(625	)		28,250		(39,610	)		(3,200	)		—		18,419		86
Other debt obligations		5,843		(4	)		3,847		(9,431	)		(63	)		—		192		—
Agency mortgage-backed securities		806		(64	)		1,608		(982	)		(1	)		—		1,367		(148	)
Collateralized debt obligations		23,235		18,624			5,488		(46,175	)		(525	)		—		647		63
Equities		60		52			—		—			—			—		112		(108	)
Preferred stock		—		—			1,301		(730	)		—			—		571		—
Investments		18,084		2,149			1,200		—			(3,123	)		—		18,310		2,123
Derivatives		—		6,304			—		—			(4,608	)		—		1,696		1,696

Total	$	128,203	$	31,181		$	121,126	$	(189,353	)	$	(11,689	)	$	—	$	79,468	$	(7,108	)

The following table summarizes the changes in the Company's Level 3 financial instruments for the year ended December 31, 2010:

(In thousands)	Balance at December 31, 2009		Total gains or (losses) (realized and unrealized)(1)			Purchases		Sales			Settlements			Transfers in and/or out of Level 3		Balance at December 31, 2010		Changes in unrealized gains/(losses) on Level 3 assets still held at the reporting date(1)

Commercial mortgage-backed securities	$	32,585	$	22,704		$	228,877	$	(233,456	)	$	(4,139	)	$	—	$	46,571	$	(271	)
Residential mortgage-backed securities		5,177		(251	)		63,657		(32,900	)		(2,079	)		—		33,604		(521	)
Other debt obligations		9,775		2,486			41,238		(43,449	)		(4,207	)		—		5,843		—
Agency mortgage-backed securities		5,082		1,887			5,410		(11,400	)		(173	)		—		806		(22	)
Collateralized debt obligations		7,371		1,254			60,713		(45,668	)		(435	)		—		23,235		(131	)
Corporate debt securities		1		(1	)		—		—			—			—		—		—
Equities		60		—			—		—			—			—		60		—
Investments		19,326		(1,064	)		432		—			(610	)		—		18,084		2,210

Total	$	79,377	$	27,015		$	400,327	$	(366,873	)	$	(11,643	)	$	—	$	128,203	$	1,265