Financial Instruments (Tables)

3 Months Ended

Mar. 31, 2013

Financial Instruments

Schedule of categorization of the financial instruments within the fair value hierarchy

The following table summarizes the categorization of the financial instruments within the fair value hierarchy at March 31, 2013:

	Assets at Fair Value
(In thousands of dollars)	Level 1		Level 2		Level 3		Total
Financial instruments owned
Agency mortgage-backed securities	$	—	$	462,940	$	5	$	462,945
Federal agency obligations	—		12,144		—		12,144
Corporate debt securities	—		1,156		—		1,156
Residential mortgage-backed securities	—		438		91		529
Equity securities	730		—		28		758
U.S. government obligations	25		—		—		25
Commercial mortgage-backed securities	—		—		18		18
Collateralized debt obligations	—		998		659		1,657
Total financial instruments owned, at fair value	755		477,676		801		479,232
Loans held for sale, ClearPoint, at fair value	—		7,693		—		7,693
Investments	—		—		21,597		21,597
Total	$	755	$	485,369	$	22,398	$	508,522

	Liabilities at Fair Value
(In thousands of dollars)	Level 1		Level 2		Level 3		Total
Securities sold, but not yet purchased
U.S. government obligations	$	20,034	$	—	$	—	$	20,034
Corporate debt securities	—		39		—		39
Derivatives (1)	1,640		—		—		1,640
Total securities sold, but not yet purchased	$	21,674	$	39	$	—	$	21,713

(1) Unrealized gains/(losses) relating to derivatives are reported in Financial instruments owned and Securities sold, but not yet purchased, at fair value in the Consolidated Statements of Financial Condition.

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 of dollars)	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
Total financial instruments owned, at fair value	5,342		1,087,899		2,940		1,096,181
Investments	—		—		20,478		20,478
Total	$	5,342	$	1,087,899	$	23,418	$	1,116,659

	Liabilities at Fair Value
(In thousands of dollars)	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

Schedule of Disclosure About Significant Unobservable Inputs

Valuation Technique	Unobservable Input	Range (Weighted Average)
Market comparable companies	Enterprise value/Revenue multiple	1.5x – 6.7x (5.9x)
	Discount applied to multiples	0.0% - 40.0% (27.0%)

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 three months ended March 31, 2013:

(In thousands of dollars)	Balance at December 31, 2012		Total gains or (losses) (realized and unrealized) (1)			Purchases		Sales			Settlements			Transfers in and/or out of Level 3		Balance at March  31, 2013		Changes in unrealized gains/(losses) on Level 3 assets still held at the reporting date (1)
Agency mortgage-backed securities	$	1,110	$	(45	)	$	—	$	(1,060	)	$	—		$	—	$	5	$	—
Collateralized debt obligations	671		(12		)	—		—			—			—		659		(12		)
Residential mortgage-backed securities	149		4			—		(50		)	(12		)	—		91		—
Equities	28		—			—		—			—			—		28		—
Commercial mortgage-backed securities	18		—			—		—			—			—		18		—
Investments	20,478		172			947		—			—			—		21,597		188
Derivatives	964		—			—		—			(964		)	—		—		—
Total	$	23,418	$	119		$	947	$	(1,110	)	$	(976	)	$	—	$	22,398	$	176

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

The following table summarizes the changes in the Company’s Level 3 financial instruments for the three months ended March 31, 2012:

(In thousands of dollars)	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 March  31, 2012		Changes in unrealized gains/(losses) on Level 3 assets still held at the reporting date (1)
Commercial mortgage-backed securities	$	38,154	$	(3,505	)	$	14,845	$	(20,163	)	$	(134	)	$	(1,347	)	$	27,850	$	(3,019	)
Residential mortgage-backed securities	18,419		(548		)	26,529		(16,156		)	(682		)	(959		)	26,603		(32		)
Other debt obligations	192		3			3,254		(3,131		)	—			—			318		(2		)
Agency mortgage-backed securities	1,367		(68		)	295		(1,232		)	—			—			362		(60		)
Collateralized debt obligations	647		(62		)	—		—			—			—			585		(61		)
Equities	112		(9		)	—		—			—			—			103		(10		)
Preferred stock	571		106			682		(1,359		)	—			—			—		—
Investments	18,310		132			—		—			(2		)	—			18,440		325
Derivatives	1,696		885			—		—			(1,696		)	—			885		885
Total	$	79,468	$	(3,066	)	$	45,605	$	(42,041	)	$	(2,514	)	$	(2,306	)	$	75,146	$	(1,974	)

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

(2) During the three months ended March 31, 2012, the Company transferred approximately $1.3 million of commercial mortgage backed securities and approximately $1.0 million of residential mortgage-backed securities from Level 3 to Level 2 due to price discovery resulting from Company trading activity occurring in close proximity to March 31, 2012.