Fair Value Measurements (Tables)

3 Months Ended

Mar. 31, 2016

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



(Expressed in thousands)
	As of March 31, 2016				As of December 31, 2015
	Owned		Sold		Owned		Sold
U.S. Government, agency and sovereign obligations	$	749,323	$	204,003	$	509,614	$	77,485
Corporate debt and other obligations	22,823		11,166		16,138		1,652
Mortgage and other asset-backed securities	4,151		27		3,504		27
Municipal obligations	80,220		—		30,132		—
Convertible bonds	50,984		15,988		54,693		5,951
Corporate equities	44,964		39,768		34,475		41,378
Money markets	132		—		35		—
Auction rate securities	84,185		—		86,802		—
Total	$	1,036,782	$	270,952	$	735,393	$	126,493

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 March 31, 2016
Product	Principal		Valuation Adjustment			Fair Value		Valuation Technique	Unobservable Input	Range	Weighted Average
Auction Rate Securities ("ARS") Owned ⁽¹⁾
Auction Rate Preferred Securities	$	83,175	$	2,406		$	80,769	Discounted Cash Flow	Discount Rate ⁽²⁾	1.15% to 1.56%	1.36%
									Duration	4.0 years	4.0 years
									Current Yield ⁽³⁾	0.47% to 0.75%	0.61%
Municipal Auction Rate Securities	25		1			24		Discounted Cash Flow	Discount Rate ⁽⁴⁾	1.98%	1.98%
									Duration	4.5 years	4.5 years
									Current Yield ⁽³⁾	1.15%	1.15%
Student Loan Auction Rate Securities	300		25			275		Discounted Cash Flow	Discount Rate ⁽⁵⁾	2.75%	2.75%
									Duration	7.0 years	7.0 years
									Current Yield⁽³⁾	1.44%	1.44%
Other ⁽⁷⁾	3,625		508			3,117		Secondary Market Trading Activity	Observable trades in inactive market for in portfolio securities	85.99% of par	85.99% of par
	$	87,125	$	2,940		$	84,185
Auction Rate Securities Commitments to Purchase ⁽⁶⁾
Auction Rate Preferred Securities	$	11,237	$	(1,540	)	$	12,777	Discounted Cash Flow	Discount Rate ⁽²⁾	1.15% to 1.56%	1.36%
									Duration	4.0 years	4.0 years
									Current Yield ⁽³⁾	0.47% to 0.75%	0.61%
	21,312		559			20,753		Discounted Cash Flow	Discount Rate ⁽²⁾	1.15% to 1.56%	1.36%
									Duration	4.0 years	4.0 years
									Current Yield ⁽³⁾	0.47% to 0.75%	0.61%
	$	32,549	$	(981	)	$	33,530
Total	$	119,674	$	1,959		$	117,715


(1)	Principal amount represents the par value of the ARS and is included in securities owned in the condensed consolidated balance sheet at March 31, 2016. The valuation adjustment amount is included as a reduction to securities owned in the condensed consolidated balance sheet at March 31, 2016.


(2)	Derived by applying a multiple to the spread between 110% to 150% to the U.S. Treasury rate of 1.04%.


(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 1.13%.


(5)	Derived by applying the sum of the spread of 1.20% to the U.S. Treasury rate of 1.55%.

(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 amounts, unrealized gains and losses, are included in other assets and accounts payable and other liabilities, respectively, on the condensed consolidated balance sheet at March 31, 2016.


(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 March 31, 2016:



(Expressed in thousands)
	Fair Value		Unfunded Commitments		Redemption Frequency	Redemption Notice Period
Hedge funds ⁽¹⁾	$	2,396	$	—	Quarterly - Annually	30 - 120 Days
Private equity funds ⁽²⁾	4,866		1,251		N/A	N/A
	$	7,262	$	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 March 31, 2016 and December 31, 2015, 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 March 31, 2016



(Expressed in thousands)
	Fair Value Measurements at March 31, 2016
	Level 1		Level 2		Level 3		Total
Assets
Cash equivalents	$	13,449	$	—	$	—	$	13,449
Deposits with clearing organizations	29,981		—		—		29,981
Securities owned:
U.S. Treasury securities	715,404		—		—		715,404
U.S. Agency securities	1,000		29,545		—		30,545
Sovereign obligations	—		3,374		—		3,374
Corporate debt and other obligations	—		22,823		—		22,823
Mortgage and other asset-backed securities	—		4,151		—		4,151
Municipal obligations	—		80,135		85		80,220
Convertible bonds	—		50,984		—		50,984
Corporate equities	44,964		—		—		44,964
Money markets	132		—		—		132
Auction rate securities	—		—		84,185		84,185
Securities owned, at fair value	761,500		191,012		84,270		1,036,782
Investments ⁽¹⁾	—		—		161		161
Loans held for sale	—		13,532		—		13,532
Derivative contracts:
TBAs	—		811		—		811
Interest rate lock commitments	—		—		14,024		14,024
ARS purchase commitments	—		—		1,540		1,540
Derivative contracts, total	—		811		15,564		16,375
Total	$	804,930	$	205,355	$	99,995	$	1,110,280
Liabilities
Securities sold, but not yet purchased:
U.S. Treasury securities	$	202,838	$	—	$	—	$	202,838
U.S. Agency securities	—		13		—		13
Sovereign obligations	—		1,152		—		1,152
Corporate debt and other obligations	—		11,166		—		11,166
Mortgage and other asset-backed securities	—		27		—		27
Convertible bonds	—		15,988		—		15,988
Corporate equities	39,768		—		—		39,768
Securities sold, but not yet purchased, at fair value	242,606		28,346		—		270,952
Derivative contracts:
Futures	709		—		—		709
Foreign currency forward contracts	17		—		—		17
TBAs	—		11,816		—		11,816
ARS purchase commitments	—		—		559		559
Derivative contracts, total	726		11,816		559		13,101
Total	$	243,332	$	40,162	$	559	$	284,053


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

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⁾	—		—		157		157
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	$	96,201	$	1,062,348
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 condensed 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 three months ended March 31, 2016 and 2015:



(Expressed in thousands)
	Level 3 Assets and Liabilities
	For the Three Months Ended March 31, 2016
			Total Realized
			and Unrealized
	Beginning		Gains		Purchases		Sales and			Transfers		Ending
	Balance		(Losses) ⁽⁴⁾⁽⁵⁾		and Issuances		Settlements			In (Out)		Balance
Assets
Municipals	$	81	$	4	$	—	$	—		$	—	$	85
Auction rate securities ^(1)(6)(7)	86,802		2,233		11,450		(16,300		)	—		84,185
Interest rate lock commitments ⁽²⁾	9,161		4,863		—					—		14,024
Investments	157		4							—		161
ARS purchase commitments ⁽³⁾	—		1,540		—		—			—		1,540
Liabilities
Interest rate lock commitments ⁽²⁾	923		923		—		—			—		—
ARS purchase commitments ⁽³⁾	1,369		810		—		—			—		559


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


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


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

(6)

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.


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



(Expressed in thousands)
	Level 3 Assets and Liabilities
	For the Three Months Ended March 31, 2015
			Total Realized
			and Unrealized
	Beginning		Gains			Purchases		Sales and			Transfers		Ending
	Balance		(Losses) ⁽⁴⁾⁽⁵⁾			and Issuances		Settlements			In (Out)		Balance
Assets
Municipals	$	164	$	(60	)	$	—	$	—		$	—	$	104
Auction rate securities^(1)(6)(7)	91,422		935			8,225		(1,525		)	—		99,057
Interest rate lock commitments ⁽²⁾	7,576		3,848			—		—			—		11,424
Investments	193		(9		)	—		—			—		184
Liabilities
Interest rate lock commitments ⁽²⁾	1,222		678			—		—			—		544
ARS purchase commitments ⁽³⁾	902		105			—		—			—		797


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


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


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

(6)


(7)	Sales and settlements for the ARS purchase commitments represent additional purchase commitments made during the period 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 March 31, 2016



(Expressed in thousands)
					Fair Value Measurement: Assets
	As of March 31, 2016				As of March 31, 2016
	Carrying Value		Fair Value		Level 1		Level 2		Level 3		Total
Cash	$	49,030	$	49,030	$	49,030	$	—	$	—	$	49,030
Deposits with clearing organization	26,586		26,586		26,586		—		—		26,586
Receivable from brokers, dealers and clearing organizations:
Securities borrowed	190,963		190,963		—		190,963		—		190,963
Receivables from brokers	36,059		36,059		—		36,059		—		36,059
Securities failed to deliver	10,914		10,914		—		10,914		—		10,914
Clearing organizations	22,957		22,957		—		22,957		—		22,957
Other	2,470		2,470		—		2,470		—		2,470
	263,363		263,363		—		263,363		—		263,363
Receivable from customers	791,631		791,631		—		791,631		—		791,631
Mortgage servicing rights	28,024		41,777		—		—		41,777		41,777
Investments ⁽¹⁾	53,482		53,482		—		53,482		—		53,482


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



(Expressed in thousands)
					Fair Value Measurement: Liabilities
	As of March 31, 2016				As of March 31, 2016
	Carrying Value		Fair Value		Level 1		Level 2		Level 3		Total
Drafts payable	$	37,663	$	37,663	$	37,663	$	—	$	—	$	37,663
Bank call loans	148,300		148,300		—		148,300		—		148,300
Payables to brokers, dealers and clearing organizations:
Securities loaned	143,157		143,157		—		143,157		—		143,157
Payable to brokers	10,232		10,232		—		10,232		—		10,232
Securities failed to receive	24,781		24,781		—		24,781		—		24,781
Other	29,709		29,709		—		29,709		—		29,709
	207,879		207,879		—		207,879		—		207,879
Payables to customers	521,557		521,557		—		521,557		—		521,557
Securities sold under agreements to repurchase	529,752		529,752		—		529,752		—		529,752
Warehouse payable	11,845		11,845		—		11,845		—		11,845
Senior secured notes	150,000		152,195		—		152,195		—		152,195

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 condensed 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

Notional Amounts and Fair Values of Derivatives by Product

The notional amounts and fair values of the Company’s derivatives at March 31, 2016 and December 31, 2015 by product were as follows:



(Expressed in thousands)
	Fair Value of Derivative Instruments at March 31, 2016
	Description	Notional		Fair Value
Assets
Derivatives not designated as hedging instruments ⁽¹⁾
Other contracts	TBAs	$	135,100	$	803
	TBA sale contracts	3,480		8
	Interest rate lock commitments	248,420		14,024
	ARS purchase commitments	11,237		1,540
		$	398,237	$	16,375
Liabilities
Derivatives not designated as hedging instruments ⁽¹⁾
Commodity contracts	Futures	$	4,060,000	$	709
Other contracts	Foreign exchange forward contracts	400		17
	TBAs	132,900		798
	TBA sale contracts	257,592		11,018
	ARS purchase commitments	21,312		559
	Forward start repurchase agreements	680,000		—
		$	5,152,204	$	13,101


(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, 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.

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 condensed consolidated statements of operations for the three months ended March 31, 2016 and 2015:



(Expressed in thousands)
	The Effect of Derivative Instruments on the Statement of Operations
	For the Three Months Ended March 31, 2016
		Recognized in Income on Derivatives (pre-tax)
Types	Description	Location	Gain (Loss)
Commodity contracts	Futures	Principal transactions revenue	$	(1,754	)
Other contracts	Foreign exchange forward contracts	Other revenue	17
	TBAs	Principal transactions revenue	(9		)
	TBA sale contracts	Other revenue	(7,901		)
	Interest rate lock commitments	Other revenue	5,786
	ARS purchase commitments	Principal transactions revenue	2,350
			$	(1,511	)



(Expressed in thousands)
	The Effect of Derivative Instruments on the Statement of Operations
	For the Three Months Ended March 31, 2015
		Recognized in Income on Derivatives (pre-tax)
Types	Description	Location	Gain (Loss)
Commodity contracts	Futures	Principal transactions revenue	$	(1,480	)
Other contracts	Foreign exchange forward contracts	Other revenue	3
	TBAs	Principal transactions revenue	(14		)
	TBA sale contracts	Other revenue	(1,619		)
	Interest rate lock commitments	Other revenue	4,526
	ARS purchase commitments	Principal transactions revenue	105
			$	1,521