Fair value measurements (Tables)

12 Months Ended

Dec. 31, 2015

Securities Owned and Securities Sold, But Not Yet Purchased at Fair Value



(Expressed in thousands)
	As of December 31,
	2015				2014
	Owned		Sold		Owned		Sold
U.S. Government, agency and sovereign obligations	$	509,614	$	77,485	$	570,607	$	30,615
Corporate debt and other obligations	16,138		1,652		19,795		2,646
Mortgage and other asset-backed securities	3,504		27		6,689		255
Municipal obligations	30,132		—		60,833		51
Convertible bonds	54,693		5,951		49,813		11,369
Corporate equities	34,475		41,378		42,751		47,574
Money markets	35		—		1,245		—
Auction rate securities	86,802		—		91,422		—
Total	$	735,393	$	126,493	$	843,155	$	92,510

Quantitative Information about Level 3 Fair Value Measurements

Additional information regarding the valuation technique and inputs for ARS used is as follows:



(Expressed in thousands)
Quantitative Information about Level 3 Fair Value Measurements at December 31, 2015
Product	Principal		Valuation Adjustment		Fair Value		Valuation Technique	Unobservable Input	Range	Weighted Average
Auction Rate Securities ("ARS") Owned ⁽¹⁾
Auction Rate Preferred Securities	$	87,925	$	4,550	$	83,375	Discounted Cash Flow	Discount Rate ⁽²⁾	1.70% to 2.32%	2.00%
								Duration	4.0 Years	4.0 Years
								Current Yield ⁽³⁾	0.44% to 0.85%	0.64%
Municipal Auction Rate Securities	25		2		23		Discounted Cash Flow	Discount Rate ⁽⁴⁾	2.90%	2.90%
								Duration	4.5 Years	4.5 Years
								Current Yield ⁽³⁾	1.14%	1.14%
Student Loan Auction Rate Securities	400		27		373		Discounted Cash Flow	Discount Rate ⁽⁵⁾	3.30%	3.30%
								Duration	7.0 Years	7.0 Years
								Current Yield ⁽³⁾	2.19%	2.19%
Other ⁽⁷⁾	3,625		594		3,031		Secondary Market Trading Activity	Observable trades in inactive market for in-portfolio securities	83.62% of par	83.62% of par
	$	91,975	$	5,173	$	86,802
Auction Rate Securities Commitments to Purchase ⁽⁶⁾
Auction Rate Preferred Securities	$	27,766	$	1,366	$	26,400	Discounted Cash Flow	Discount Rate ⁽²⁾	1.70% to 2.32%	2.00%
								Duration	4.0 Years	4.0 Years
								Current Yield ⁽³⁾	0.44% to 0.85%	0.64%
Municipal Auction Rate Securities	2		—		2		Discounted Cash Flow	Discount Rate ⁽⁴⁾	2.90%	2.90%
								Duration	4.5 Years	4.5 Years
								Current Yield ⁽³⁾	1.14%	1.14%
Student Loan Auction Rate Securities	45		3		42		Discounted Cash Flow	Discount Rate ⁽⁵⁾	3.30%	3.30%
								Duration	7.0 Years	7.0 Years
								Current Yield ⁽³⁾	2.19%	2.19%
	$	27,813	$	1,369	$	26,444
Total	$	119,788	$	6,542	$	113,246


(1)	Principal amount represents the par value of the ARS and is included in securities owned in the consolidated balance sheet at December 31, 2015. The valuation adjustment amount is included as a reduction to securities owned in the consolidated balance sheet at December 31, 2015.


(2)	Derived by applying a multiple to the spread between 110% to 150% to the U.S. Treasury rate of 1.54%.


(3)	Based on current yields for ARS positions owned.


(4)	Derived by applying a multiple to the spread of 175% to the U.S. Treasury rate of 1.66%.


(5)	Derived by applying the sum of the spread of 1.20% to the U.S. Treasury rate of 2.10%.


(6)	Principal amount represents the present value of the ARS par value that the Company is committed to purchase at a future date. This principal amount is presented as an off-balance sheet item. The Valuation Adjustment amount is included in accounts payable and other liabilities on the consolidated balance sheet at December 31, 2015.


(7)	Represents ARS issued by a credit default obligation structure that the Company has purchased and is committed to purchase as a result of a legal settlement.

Investments in Company-Sponsored Funds

The following table provides information about the Company's investments in Company-sponsored funds at December 31, 2015:



(Expressed in thousands)
	Fair Value		Unfunded Commitments		Redemption Frequency	Redemption Notice Period
Hedge funds ⁽¹⁾	$	2,325	$	—	Quarterly - Annually	30 - 120 Days
Private equity funds ⁽²⁾	5,302		1,251		N/A	N/A
	$	7,627	$	1,251


(1)	Includes investments in hedge funds and hedge fund of funds that pursue long/short, event-driven, and activist strategies. Each hedge fund has various restrictions regarding redemption; no investment is locked-up for a period greater than one year.


(2)	Includes private equity funds and private equity fund of funds with a focus on diversified portfolios, real estate and global natural resources. Due to the illiquid nature of these funds, investors are not permitted to make withdrawals without the consent of the general partner. The lock-up period of the private equity funds can extend to 10 years.

Assets and Liabilities Measured at Fair Value on Recurring Basis

The Company's assets and liabilities, recorded at fair value on a recurring basis as of December 31, 2015 and December 31, 2014, have been categorized based upon the above fair value hierarchy as follows:

Assets and liabilities measured at fair value on a recurring basis as of December 31, 2015



(Expressed in thousands)
	Fair Value Measurements at December 31, 2015
	Level 1		Level 2		Level 3		Total
Assets
Cash equivalents	$	13,000	$	—	$	—	$	13,000
Deposits with clearing organizations	31,456		—		—		31,456
Securities owned:
U.S. Treasury securities	436,533		—		—		436,533
U.S. Agency securities	25,240		46,176		—		71,416
Sovereign obligations	—		1,665		—		1,665
Corporate debt and other obligations	—		16,138		—		16,138
Mortgage and other asset-backed securities	—		3,504		—		3,504
Municipal obligations	—		30,051		81		30,132
Convertible bonds	—		54,693		—		54,693
Corporate equities	34,475		—		—		34,475
Money markets	35		—		—		35
Auction rate securities	—		—		86,802		86,802
Securities owned, at fair value	496,283		152,227		86,883		735,393
Investments ⁽¹⁾	—		—		8,263		8,263
Loans held for sale	—		60,234		—		60,234
Securities purchased under agreements to resell ⁽²⁾	—		206,499		—		206,499
Derivative contracts:
TBAs	—		6,448		—		6,448
Interest rate lock commitments	—		—		9,161		9,161
Derivative contracts, total	—		6,448		9,161		15,609
Total	$	540,739	$	425,408	$	104,307	$	1,070,454
Liabilities
Securities sold, but not yet purchased:
U.S. Treasury securities	$	75,653	$	—	$	—	$	75,653
U.S. Agency securities	—		15		—		15
Sovereign obligations	—		1,817		—		1,817
Corporate debt and other obligations	—		1,652		—		1,652
Mortgage and other asset-backed securities	—		27		—		27
Convertible bonds			5,951		—		5,951
Corporate equities	41,378		—		—		41,378
Securities sold, but not yet purchased at fair value	117,031		9,462		—		126,493
Derivative contracts:
Futures	249		—		—		249
Foreign currency forward contracts	2		—		—		2
TBAs	—		11,619		—		11,619
Interest rate lock commitments	—		—		923		923
ARS purchase commitments	—		—		1,369		1,369
Derivative contracts, total	251		11,619		2,292		14,162
Total	$	117,282	$	21,081	$	2,292	$	140,655


(1)	Included in other assets on the consolidated balance sheet.


(2)	Included in securities purchased under agreements to resell where the Company has elected fair value option treatment.

Assets and liabilities measured at fair value on a recurring basis as of December 31, 2014



(Expressed in thousands)
	Fair Value Measurements at December 31, 2014
	Level 1		Level 2		Level 3		Total
Assets
Cash equivalents	$	31,175	$	—	$	—	$	31,175
Deposits with clearing organizations	24,188		—		—		24,188
Securities owned:
U.S. Treasury securities	540,223		—		—		540,223
U.S. Agency securities	—		26,261		—		26,261
Sovereign obligations	—		4,123		—		4,123
Corporate debt and other obligations	—		19,795		—		19,795
Mortgage and other asset-backed securities	—		6,689		—		6,689
Municipal obligations	—		60,669		164		60,833
Convertible bonds	—		49,813		—		49,813
Corporate equities	42,751		—		—		42,751
Money markets	1,245		—		—		1,245
Auction rate securities	—		—		91,422		91,422
Securities owned, at fair value	584,219		167,350		91,586		843,155
Investments ⁽¹⁾	—		—		9,508		9,508
Loans held for sale	—		19,243		—		19,243
Securities purchased under agreements to resell ⁽²⁾	—		250,000		—		250,000
Derivative contracts:
TBAs	—		4,535		—		4,535
Interest lock commitments	—		—		7,576		7,576
Derivative contracts, total	—		4,535		7,576		12,111
Total	$	639,582	$	441,128	$	108,670	$	1,189,380
Liabilities
Securities sold, but not yet purchased:
U.S. Treasury securities	$	30,581	$	—	$	—	$	30,581
U.S. Agency securities	—		34		—		34
Corporate debt and other obligations	—		2,646		—		2,646
Mortgage and other asset-backed securities	—		255		—		255
Municipal obligations	—		51		—		51
Convertible bonds	—		11,369		—		11,369
Corporate equities	47,574		—		—		47,574
Securities sold, but not yet purchased at fair value	78,155		14,355		—		92,510
Derivative contracts:
Futures	353		—		—		353
Foreign currency forward contracts	10		—		—		10
TBAs	—		1,018		—		1,018
Interest rate lock commitments	—		—		1,222		1,222
ARS purchase commitments	—		—		902		902
Derivative contracts, total	363		1,018		2,124		3,505
Total	$	78,518	$	15,373	$	2,124	$	96,015


(1)	Included in other assets on the consolidated balance sheet.


(2)	Included in securities purchased under agreements to resell where the Company has elected fair value option treatment.

Changes in Level 3 Assets and Liabilities Measured at Fair Value on Recurring Basis

The following tables present changes in Level 3 assets and liabilities measured at fair value on a recurring basis for the years ended December 31, 2015 and 2014:



(Expressed in thousands)
	Level 3 Assets and Liabilities
	For the Year Ended December 31, 2015
	Beginning Balance		Total Realized and Unrealized Gains (Losses) ⁽⁵⁾⁽⁶⁾			Purchases and Issuances		Sales and Settlements			Transfers In (Out)		Ending Balance


Assets
Municipals	$	164	$	(63	)	$	—	$	(20	)	$	—	$	81
Auction rate securities ^(1)(7)(8)	91,422		1,955			17,950		(24,525		)	—		86,802
Interest rate lock commitments ⁽²⁾	7,576		1,585			—		—			—		9,161
Investments ⁽³⁾	9,508		(944		)	437		(738		)	—		8,263
Liabilities
Interest rate lock commitments ⁽²⁾	1,222		299			—		—			—		923
ARS purchase commitments ⁽⁴⁾	902		(467		)	—		—			—		1,369


(1)	Represents auction rate preferred securities, municipal auction rate securities and student loan auction rate securities that failed in the auction rate market.

(2)

Interest rate lock commitment assets and liabilities are recorded upon the commitment to originate a loan with a borrower and sell the loan to an investor. The commitment assets and liabilities are recognized at fair value, which reflects the fair value of the contractual loan origination related fees and sale premiums, net of co-broker fees, and the estimated fair value of the expected net future cash flows associated with the servicing of the loan.


(3)	Primarily represents general partner ownership and limited partner interests in hedge funds and private equity funds sponsored by the Company.


(4)	Represents the difference in principal and fair value for auction rate securities purchase commitments outstanding at the end of the year.


(5)	Included in principal transactions on the consolidated statement of income, except for investments which are included in other income on the consolidated statement of income.


(6)	Unrealized gains (losses) are attributable to assets or liabilities that are still held at the reporting date.

(7)

Purchases and issuances in connection with ARS purchase commitments represent instances in which the Company purchased ARS securities from clients during the period pursuant to regulatory and legal settlements and awards that satisfy the outstanding commitment to purchase obligation. This also includes instances where the ARS issuer has redeemed ARS where the Company had an outstanding purchase commitment prior to the Company purchasing those ARS.


(8)	Sales and settlements for the ARS purchase commitments represent additional purchase commitments made during the year for regulatory and legal ARS settlements and awards.



(Expressed in thousands)
	Level 3 Assets and Liabilities
	For the Year Ended December 31, 2014
	Beginning Balance		Total Realized and Unrealized Gains (Losses) ⁽⁵⁾⁽⁶⁾			Purchases and Issuances		Sales and Settlements			Transfers In (Out)		Ending Balance


Assets
Municipals	$	236	$	(72	)	$	—	$	—		$	—	$	164
Auction rate securities ^(1)(7)(8)	85,124		(622		)	20,625		(13,705		)	—		91,422
Interest rate lock commitments ⁽²⁾	2,375		5,201			—		—			—		7,576
Investments ⁽³⁾	5,946		101			5,178		(1,717		)	—		9,508
Liabilities
Interest rate lock commitments ⁽²⁾	3,653		2,431			—		—			—		1,222
ARS purchase commitments ⁽⁴⁾	2,600		1,698			—		—			—		902


(1)	Represents auction rate preferred securities, municipal auction rate securities and student loan auction rate securities that failed in the auction rate market.

(2)


(3)	Primarily represents general partner ownership and limited partner interests in hedge funds and private equity funds sponsored by the Company.


(4)	Represents the difference in principal and fair value for auction rate securities purchase commitments outstanding at the end of the year.


(5)	Included in principal transactions on the consolidated statement of income, except for investments which are included in other income on the consolidated statement of income.


(6)	Unrealized gains (losses) are attributable to assets or liabilities that are still held at the reporting date.

(7)


(8)	Sales and settlements for the ARS purchase commitments represent additional purchase commitments made during the year for regulatory and legal ARS settlements and awards.

Assets and Liabilities Not Measured at Fair Value on Recurring Basis

Assets and liabilities not measured at fair value as of December 31, 2015



(Expressed in thousands)					Fair Value Measurement: Assets
	As of December 31, 2015				As of December 31, 2015
	Carrying Value		Fair Value		Level 1		Level 2		Level 3		Total
Cash	$	50,364	$	50,364	$	50,364	$	—	$	—	$	50,364
Deposits with clearing organization	18,034		18,034		18,034		—		—		18,034
Receivable from brokers, dealers and clearing organizations:
Securities borrowed	224,672		224,672		—		224,672		—		224,672
Receivables from brokers	49,458		49,458		—		49,458		—		49,458
Securities failed to deliver	7,799		7,799		—		7,799		—		7,799
Clearing organizations	25,030		25,030		—		25,030		—		25,030
Other	53,954		53,954		—		53,954		—		53,954
	360,913		360,913		—		360,913		—		360,913
Receivable from customers	840,355		840,355		—		840,355		—		840,355
Mortgage servicing rights	28,168		41,838		—		—		41,838		41,838
Investments ⁽¹⁾	53,286		53,286		—		53,286		—		53,286


(1)	Included in other assets on the consolidated balance sheet.



(Expressed in thousands)					Fair Value Measurement: Liabilities
	As of December 31, 2015				As of December 31, 2015
	Carrying Value		Fair Value		Level 1		Level 2		Level 3		Total
Drafts payable	$	48,011	$	48,011	$	48,011	$	—	$	—	$	48,011
Bank call loans	100,200		100,200		—		100,200		—		100,200
Payables to brokers, dealers and clearing organizations:
Securities loaned	130,658		130,658		—		130,658		—		130,658
Payable to brokers	3,316		3,316		—		3,316		—		3,316
Securities failed to receive	21,513		21,513		—		21,513		—		21,513
Other	9,059		9,059		—		9,059		—		9,059
	164,546		164,546		—		164,546		—		164,546
Payables to customers	594,833		594,833		—		594,833		—		594,833
Securities sold under agreements to repurchase	651,445		651,445		—		651,445		—		651,445
Warehouse payable	54,341		54,341		—		54,341		—		54,341
Senior secured notes	150,000		154,568		—		154,568		—		154,568

Assets and liabilities not measured at fair value as of December 31, 2014



(Expressed in thousands)					Fair Value Measurement: Assets
	As of December 31, 2014				As of December 31, 2014
	Carrying Value		Fair Value		Level 1		Level 2		Level 3		Total
Cash	$	32,632	$	32,632	$	32,632	$	—	$	—	$	32,632
Cash segregated for regulatory and other purposes	18,594		18,594		18,594		—		—		18,594
Deposits with clearing organization	12,322		12,322		12,322		—		—		12,322
Receivable from brokers, dealers and clearing organizations:
Securities borrowed	242,172		242,172		—		242,172		—		242,172
Receivables from brokers	38,149		38,149		—		38,149		—		38,149
Securities failed to deliver	11,055		11,055		—		11,055		—		11,055
Clearing organizations	21,106		21,106		—		21,106		—		21,106
Other	1,993		1,993		—		1,993		—		1,993
	314,475		314,475		—		314,475		—		314,475
Receivable from customers	864,189		864,189		—		864,189		—		864,189
Securities purchased under agreements to resell	1,606		1,606		1,606		—		—		1,606
Mortgage servicing rights	30,140		42,279		—		—		42,279		42,279
Investments ⁽¹⁾	51,246		51,246		—		51,246		—		51,246


(1)	Included in other assets on the consolidated balance sheet.



(Expressed in thousands)					Fair Value Measurement: Liabilities
	As of December 31, 2014				As of December 31, 2014
	Carrying Value		Fair Value		Level 1		Level 2		Level 3		Total
Drafts payable	$	35,373	$	35,373	$	35,373	$	—	$	—	$	35,373
Bank call loans	59,400		59,400		—		59,400		—		59,400
Payables to brokers, dealers and clearing organizations:
Securities loaned	137,892		137,892		—		137,892		—		137,892
Payable to brokers	4,559		4,559		—		4,559		—		4,559
Securities failed to receive	23,573		23,573		—		23,573		—		23,573
Other	91,137		91,137		—		91,137		—		91,137
	257,161		257,161		—		257,161		—		257,161
Payables to customers	652,256		652,256		—		652,256		—		652,256
Securities sold under agreements to repurchase	687,440		687,440		—		687,440		—		687,440
Warehouse payable	16,683		16,683		—		16,683		—		16,683
Senior secured notes	150,000		157,782		—		157,782		—		157,782

Notional Amounts and Fair Values of Derivatives by Product

The notional amounts and fair values of the Company's derivatives at December 31, 2015 and 2014 by product were as follows:



(Expressed in thousands)
	Fair Value of Derivative Instruments at December 31, 2015
	Description	Notional		Fair Value
Assets:
Derivatives not designated as hedging instruments⁽¹⁾
Other contracts	TBAs	$	35,650	$	4
	TBA sale contracts	83,810		6,444
	Interest rate lock commitments	203,648		9,161
		$	323,108	$	15,609
Liabilities:
Derivatives not designated as hedging instruments ⁽¹⁾
Commodity contracts	Futures	$	2,943,000	$	249
Other contracts	Foreign exchange forward contracts	400		2
	TBAs	24,350		5
	TBA sale contracts	223,846		11,614
	Interest rate lock commitments	48,638		923
	ARS purchase commitments	27,813		1,369
		$	3,268,047	$	14,162


(1)	See "Derivative Instruments and Hedging Activities" above for description of derivative financial instruments. Such derivative instruments are not subject to master netting agreements, thus the related amounts are not offset.



(Expressed in thousands)
	Fair Value of Derivative Instruments at December 31, 2014
	Description	Notional		Fair Value
Assets:
Derivatives not designated as hedging instruments ⁽¹⁾
Other contracts	TBAs	$	105,185	$	1,026
	TBA sale contracts	188,178		3,509
	Interest rate lock commitments	147,521		7,576
		$	440,884	$	12,111
Liabilities:
Derivatives not designated as hedging instruments⁽¹⁾
Commodity contracts	Futures	$	3,835,600	$	353
Other contracts	Foreign exchange forward contracts	400		10
	TBAs	105,186		1,018
	Interest rate lock commitments	22,269		1,222
	Forward start repurchase agreements	636,000		—
	ARS purchase commitments	12,249		902
		$	4,611,704	$	3,505


(1)	See "Derivative Instruments and Hedging Activities" above for description of derivative financial instruments. Such derivative instruments are not subject to master netting agreements, thus the related amounts are not offset.

Fair Value Amounts of Derivative Instruments and their Effect on Statement of Operations

The following table presents the location and fair value amounts of the Company's derivative instruments and their effect on the consolidated statement of income for the years ended December 31, 2015 and 2014:



(Expressed in thousands)
	The Effect of Derivative Instruments on the Statement of Income
	For the Year Ended December 31, 2015
		Recognized in Income on Derivatives (pre-tax)
Types	Description	Location	Gain (Loss)
Commodity contracts	Futures	Principal transactions revenue	$	(1,472	)
Other contracts	Foreign exchange forward contracts	Other revenue	25
	TBAs	Principal transactions revenue	(9		)
	TBA sale contracts	Other revenue	440
	Interest rate lock commitments	Other revenue	1,884
	ARS purchase commitments	Principal transactions revenue	(467		)
			$	401

(Expressed in thousands)
	The Effect of Derivative Instruments on the Statement of Income
	For the Year Ended December 31, 2014
		Recognized in Income on Derivatives (pre-tax)
Types	Description	Location	Gain (Loss)
Commodity contracts	Futures	Principal transactions revenue	$	(2,109	)
Other contracts	Foreign exchange forward contracts	Other revenue	10
	TBAs	Principal transactions revenue	(17		)
	TBA sale contracts	Other revenue	(5,530		)
	Interest rate lock commitments	Other revenue	7,632
	ARS purchase commitments	Principal transactions revenue	1,698
			$	1,684