Financial Instruments (Tables)

12 Months Ended

Dec. 31, 2012

Schedule of categorization of the financial instruments within the fair value hierarchy including those for which the company accounts for under the FVO

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, 2012:

	Assets at Fair Value

(In thousands)	Level 1		Level 2		Level 3		Total
Financial instruments owned
Agency mortgage-backed securities	$	—	$	903,928	$	1,110	$	905,038
Loans		—		77,573		—		77,573
Federal agency obligations		—		46,021		—		46,021
Corporate debt securities		—		30,246		—		30,246
Residential mortgage-backed securities		—		23,077		149		23,226
Commercial mortgage-backed securities		—		4,880		18		4,898
Preferred stock		2,439		—		—		2,439
U.S. Government obligations		1,996		100		—		2,096
Other debt obligations		—		2,074		—		2,074
Equity securities		675		—		28		703
Collateralized debt obligations		—		—		671		671
Derivatives		232		—		964		1,196
Investments		—		—		20,478		20,478

Total financial assets at fair value	$	5,342	$	1,087,899	$	23,418	$	1,116,659

	Liabilities at Fair Value

(In thousands)	Level 1		Level 2		Level 3		Total
Securities sold but not yet purchased
U.S. Government obligations	$	128,504	$	—	$	—	$	128,504
Corporate debt securities		—		2,520		—		2,520
Equity securities		2		—		—		2
Derivatives		1,704		—		—		1,704

Total financial liabilities at fair value	$	130,210	$	2,520	$	—	$	132,730

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
Loans		—		228,226		—		228,226
Federal agency obligations		—		158,774		—		158,774
Commercial mortgage-backed securities		—		—		38,154		38,154
Residential mortgage-backed securities		—		—		18,419		18,419
Corporate debt securities		—		14,524		—		14,524
U.S. Government obligations		5,789		—		—		5,789
Preferred stock		316		—		1,301		1,617
Other debt obligations		—		—		192		192
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 obligations	$	158,059	$	—	$	—	$	158,059
Corporate debt securities		—		12,254		—		12,254
Federal agency obligations		—		11,796		—		11,796
Preferred stock		184		—		730		914
Equity securities		2		—		—		2
Derivatives		1,971		—		—		1,971

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

Schedule of Disclosure About Significant Unobservable Inputs

Valuation Technique	Unobservable Input	Range (Weighted Average)

Market comparable companies	Enterprise value/Revenue multiple	4.3x – 6.7x (5.7x)
	Discount applied to multiples	25% – 40.0% (22.0%)

Schedule of changes in the company's Level 3 financial instruments

The following table summarizes the changes in the Company's Level 3 financial instruments for the year ended December 31, 2012:

(In thousands)	Balance at December 31, 2011		Total gains or (losses) (realized and unrealized)(1)			Purchases		Sales			Settlements			Transfers in and/or out of Level 3(2)			Balance at December 31, 2012		Changes in unrealized gains/(losses) on Level 3 assets still held at the reporting date(1)

Agency mortgage-backed securities	$	1,367	$	(350	)	$	222	$	(1,232	)	$	(2	)	$	1,105		$	1,110	$	(181	)
Collateralized debt obligations		647		24			61		(61	)		—			—			671		28
Residential mortgage-backed securities		18,419		(623	)		303		(17,329	)		(621	)		—			149		14
Equities		112		(84	)		—		—			—			—			28		(85	)
Commercial mortgage-backed securities		38,154		(6,938	)		8,393		(37,432	)		(58	)		(2,101	)		18	$	(58	)
Other debt obligations		192		—			3,784		(3,976	)		—			—			—		—
Preferred stock		571		870			4,942		(6,383	)		—			—			—		—
Investments		18,310		1,235			950		—			(17	)		—			20,478		1,767
Derivatives		1,696		6,539			—		—			(7,271	)		—			964		964

Total	$	79,468	$	673		$	18,655	$	(66,413	)	$	(7,969	)	$	(996	)	$	23,418	$	2,449

(1): Realized and unrealized gains/(losses) are reported in Principal transactions in the Consolidated Statements of Operations.
(2): During the year ended December 31, 2012, the Company transferred approximately $2.1 million of commercial mortgage-backed securities from Level 3 to Level 2 due to price discovery resulting from Company trading activity occurring in close proximity to the respective quarter-end. In addition, $1.1 million of agency mortgage-backed securities were transferred into Level 3 (from Level 2) due to limited price discovery at year-end.

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	)

(1): Realized and unrealized gains/(losses) are reported in Principal transactions in the Consolidated Statements of Operations.

- Definition

Tabular disclosure related to assets and liabilities by class, including financial instruments measured at fair value that are classified in shareholders' equity, if any, that are measured at fair value on a recurring and/or nonrecurring basis in periods after initial recognition. Disclosures include, but are not limited to: (a) the fair value measurements recorded and the reasons for the measurements and (b) the level within the fair value hierarchy in which the fair value measurements are categorized in their entirety (levels 1, 2, 3) as well as transfers between levels 1 and 2.

+ References

Reference 1: http://www.xbrl.org/2003/role/presentationRef

-Publisher FASB

-Name Statement of Financial Accounting Standard (FAS)

-Number 157

-Paragraph 6

-Footnote 4

-LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy.

Reference 2: http://www.xbrl.org/2003/role/presentationRef

-Publisher FASB

-Name Accounting Standards Codification

-Topic 820

-SubTopic 10

-Section 50

-Paragraph 2

-Subparagraph (a,b,bb)

-URI http://asc.fasb.org/extlink&oid=7578670&loc=d3e19207-110258

Reference 3: http://www.xbrl.org/2003/role/presentationRef

-Publisher FASB

-Name Statement of Financial Accounting Standard (FAS)

-Number 157

-Paragraph 32

-LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy.

Reference 4: http://www.xbrl.org/2003/role/presentationRef

-Publisher FASB

-Name Accounting Standards Codification

-Topic 820

-SubTopic 10

-Section 50

-Paragraph 2C

-URI http://asc.fasb.org/extlink&oid=7578670&loc=SL7498348-110258

Reference 5: http://www.xbrl.org/2003/role/presentationRef

-Publisher FASB

-Name Accounting Standards Codification

-Topic 820

-SubTopic 10

-Section 50

-Paragraph 3

-URI http://asc.fasb.org/extlink&oid=7578670&loc=d3e19279-110258

Reference 6: http://www.xbrl.org/2003/role/presentationRef

-Publisher FASB

-Name Accounting Standards Codification

-Topic 820

-SubTopic 10

-Section 50

-Paragraph 1

-URI http://asc.fasb.org/extlink&oid=7578670&loc=d3e19190-110258

Reference 7: http://www.xbrl.org/2003/role/presentationRef

-Publisher FASB

-Name Statement of Financial Accounting Standard (FAS)

-Number 157

-Paragraph 33

-Subparagraph a, b

-LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy.

+ Details

- Definition

Tabular disclosure of the fair value measurement of assets using significant unobservable inputs (Level 3), a reconciliation of the beginning and ending balances, separately presenting changes during the period attributable to the following: (1) total gains or losses for the period (realized and unrealized), segregating those gains or losses included in earnings (or changes in net assets) and gains or losses recognized in other comprehensive income (loss), and a description of where those gains or losses included in earnings (or changes in net assets) are reported in the statement of income (or activities); (2) purchases, sales, issues, and settlements (each type disclosed separately); and (3) transfers in and transfers out of Level 3 (for example, transfers due to changes in the observability of significant inputs), by class of asset.

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