Fair Value Measurements (Tables)

6 Months Ended

Jun. 30, 2017

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 ARS Level 3 Fair Value Measurements as of June 30, 2017
Product	Principal		Valuation Adjustment		Fair Value		Valuation Technique	Unobservable Input	Range	Weighted Average
Auction Rate Securities Owned ⁽¹⁾
Auction Rate Preferred Securities	$	108,900	$	2,037	$	106,863	Discounted Cash Flow	Discount Rate ⁽²⁾	1.89% to 2.58%	2.17%
								Duration	4.0 Years	4.0 Years
								Current Yield ⁽³⁾	1.50% to 1.93%	1.68%
Municipal Auction Rate Securities	25		3		22		Secondary Market Trading Activity	Trades in Inactive Market for in-Portfolio Securities	87.75% of Par	87.75% of Par
Student Loan Auction Rate Securities	300		15		285		Discounted Cash Flow	Discount Rate ⁽⁴⁾	3.34%	3.34%
								Duration	7.0 Years	7.0 Years
								Current Yield⁽³⁾	2.51%	2.51%
	$	109,225	$	2,055	$	107,170
Auction Rate Securities Commitments to Purchase ⁽⁵⁾
Auction Rate Preferred Securities	$	14,937	$	253	$	14,684	Discounted Cash Flow	Discount Rate ⁽²⁾	1.89% to 2.58%	2.17%
								Duration	4.0 Years	4.0 Years
								Current Yield ⁽³⁾	1.50% to 1.93%	1.68%
Municipal Auction Rate Securities	2		—		2		Secondary Market Trading Activity	Trades in Inactive Market for in-Portfolio Securities	87.75% of Par	87.75% of Par
Student Loan Auction Rate Securities	24		1		23		Discounted Cash Flow	Discount Rate ⁽⁴⁾	3.34%	3.34%
								Duration	7.0 Years	7.0 Years
								Current Yield ⁽³⁾	2.51%	2.51%
	$	14,963	$	254	$	14,709
Total	$	124,188	$	2,309	$	121,879


(1)	Principal amount represents the par value of the ARS and is included in securities owned on the condensed consolidated balance sheet as of June 30, 2017. The valuation adjustment amount is included as a reduction to securities owned on the condensed consolidated balance sheet as of June 30, 2017.


(2)	Derived by applying a multiple to the spread between 110% to 150% to the U.S. Treasury rate of 1.72%


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


(4)	Derived by applying the sum of the spread of 1.20% to the U.S. Treasury rate of 2.14%.


(5)	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 condensed consolidated balance sheet as of June 30, 2017.

Investments in Company-Sponsored Funds

The following table provides information about the Company's investments in Company-sponsored funds as of June 30, 2017:



(Expressed in thousands)
	Fair Value		Unfunded Commitments		Redemption Frequency	Redemption Notice Period
Hedge funds ⁽¹⁾	$	2,783	$	—	Quarterly - Annually	30 - 120 Days
Private equity funds ⁽²⁾	4,658		1,251		N/A	N/A
	$	7,441	$	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 June 30, 2017 and December 31, 2016, 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 June 30, 2017



(Expressed in thousands)
	Fair Value Measurements as of June 30, 2017
	Level 1		Level 2		Level 3		Total
Assets
Cash equivalents	$	75,462	$	—	$	—	$	75,462
Deposits with clearing organizations	27,386		—		—		27,386
Securities owned:
U.S. Treasury securities ⁽¹⁾	583,656		—				583,656
U.S. Agency securities	1,742		12,169		—		13,911
Sovereign obligations	—		20,561		—		20,561
Corporate debt and other obligations	—		34,051		—		34,051
Mortgage and other asset-backed securities	—		4,562		—		4,562
Municipal obligations	—		141,960		36		141,996
Convertible bonds	—		45,034		—		45,034
Corporate equities	35,473		—		—		35,473
Money markets	578		—		—		578
Auction rate securities	—		—		107,170		107,170
Securities owned, at fair value	621,449		258,337		107,206		986,992
Investments ⁽²⁾	—		—		168		168
Securities purchased under agreements to resell ⁽³⁾	—		3,617		—		3,617
Derivative contracts:
TBAs	—		2,901		—		2,901
Total	$	724,297	$	264,855	$	107,374	$	1,096,526
Liabilities
Securities sold but not yet purchased:
U.S. Treasury securities	$	142,877	$	—	$	—	$	142,877
U.S. Agency securities	—		6		—		6
Sovereign obligations	—		16,653		—		16,653
Corporate debt and other obligations	—		19,306		—		19,306
Mortgage and other asset-backed securities	—		2,134		—		2,134
Convertible bonds	—		16,456		—		16,456
Corporate equities	37,346		—		—		37,346
Securities sold but not yet purchased, at fair value	180,223		54,555		—		234,778
Derivative contracts:
Futures	853		—		—		853
Foreign exchange forward contracts	8		—		—		8
TBAs	—		3,015		—		3,015
ARS purchase commitments	—		—		254		254
Derivative contracts, total	861		3,015		254		4,130
Total	$	181,084	$	57,570	$	254	$	238,908


(1)	$560,000 is included in other assets on the condensed consolidated balance sheet.


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


(3)	Included in securities purchased under agreements to resell on the condensed consolidated balance sheet where the Company has elected fair value option treatment.

Assets and liabilities measured at fair value on a recurring basis as of December 31, 2016



(Expressed in thousands)
	Fair Value Measurements as of December 31, 2016
	Level 1		Level 2		Level 3		Total
Assets
Cash equivalents	$	16,242	$	—	$	—	$	16,242
Deposits with clearing organizations	26,437		—		—		26,437
Securities owned:
U.S. Treasury securities ⁽¹⁾	418,888		—		—		418,888
U.S. Agency securities	5,878		32,391		—		38,269
Sovereign obligations	—		1,894		—		1,894
Corporate debt and other obligations	—		17,074		—		17,074
Mortgage and other asset-backed securities	—		5,024		—		5,024
Municipal obligations	—		56,706		44		56,750
Convertible bonds	—		56,480		—		56,480
Corporate equities	31,174		—		—		31,174
Money markets	189		—		—		189
Auction rate securities	—		—		84,926		84,926
Securities owned, at fair value	456,129		169,569		84,970		710,668
Investments ⁽²⁾	—		—		158		158
Securities purchased under agreements to resell ⁽³⁾	—		24,006		—		24,006
Derivative contracts:
TBAs	—		814		—		814
ARS purchase commitments	—		—		849		849
Derivative contracts, total	—		814		849		1,663
Total	$	498,808	$	194,389	$	85,977	$	779,174
Liabilities
Securities sold but not yet purchased:
U.S. Treasury securities	$	28,662	$	—	$	—	$	28,662
U.S. Agency securities	—		12		—		12
Corporate debt and other obligations	—		2,536		—		2,536
Mortgage and other asset-backed securities	—		31		—		31
Municipal obligations	—		516		—		516
Convertible bonds	—		11,604		—		11,604
Corporate equities	41,689		—		—		41,689
Securities sold but not yet purchased, at fair value	70,351		14,699		—		85,050
Derivative contracts:
Futures	166		—		—		166
Foreign exchange forward contracts	1		—		—		1
TBAs	—		1,212		—		1,212
ARS purchase commitments	—		—		645		645
Derivative contracts, total	167		1,212		645		2,024
Total	$	70,518	$	15,911	$	645	$	87,074


(1)	$3.6 million is included in other assets on the condensed consolidated balance sheet.


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


(3)	Included in securities purchased under agreements to resell on the condensed consolidated balance sheet where the Company has elected fair value option treatment.

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



(Expressed in thousands)
	Level 3 Assets and Liabilities
	For the Three Months Ended June 30, 2017
			Total Realized
			and Unrealized
	Beginning		Gains			Purchases		Sales and			Transfers		Ending
	Balance		(Losses) ⁽³⁾⁽⁴⁾			and Issuances		Settlements			In (Out)		Balance
Assets
Municipal obligations	$	36	$	—		$	—	$	—		$	—	$	36
Auction rate securities ⁽¹⁾	89,743		502			17,050		(125		)	—		107,170
Investments	164		4			—		—			—		168
ARS purchase commitments ⁽²⁾	878		(878		)	—		—			—		—
Liabilities
ARS purchase commitments ⁽²⁾	359		105			—		—			—		254


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


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


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


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



(Expressed in thousands)
	Level 3 Assets and Liabilities
	For the Three Months Ended June 30, 2016
			Total Realized
			and Unrealized
	Beginning		Gains			Purchases		Sales and			Transfers		Ending
	Balance		(Losses) ⁽⁴⁾⁽⁵⁾			and Issuances		Settlements			In (Out)		Balance
Assets
Municipal obligations	$	85	$	2		$	—	$	(62	)	$	—	$	25
Auction rate securities⁽¹⁾	84,185		1,341			5,000		(1,425		)	—		89,101
Interest rate lock commitments ⁽²⁾	14,024		(571		)	—		—			—		13,453
Investments	161		(3		)	—		—			—		158
ARS purchase commitments ⁽³⁾	1,540		(629		)	—		—			—		911
Liabilities
ARS purchase commitments ⁽³⁾	559		417			—		—			—		142


(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.

The following tables present changes in Level 3 assets and liabilities measured at fair value on a recurring basis for the six months ended June 30, 2017 and 2016:



(Expressed in thousands)
	Level 3 Assets and Liabilities
	For the Six Months Ended June 30, 2017
			Total Realized
			and Unrealized
	Beginning		Gains			Purchases		Sales and			Transfers		Ending
	Balance		(Losses)⁽³⁾⁽⁴⁾			and Issuances		Settlements			In (Out)		Balance
Assets
Municipal obligations	$	44	$	(8	)	$	—	$	—		$	—	$	36
Auction rate securities ⁽¹⁾	84,926		1,144			22,050		(950		)	—		107,170
Investments	158		10			—		—			—		168
ARS purchase commitments ⁽²⁾	849		(849		)	—		—			—		—
Liabilities
ARS purchase commitments ⁽²⁾	645		391			—		—			—		254


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


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


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


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



(Expressed in thousands)
	Level 3 Assets and Liabilities
	For the Six Months Ended June 30, 2016

			Total Realized
	Beginning		and Unrealized		Purchases		Sales and			Transfers		Ending
	Balance		Gains⁽⁴⁾⁽⁵⁾		and Issuances		Settlements			In (Out)		Balance
Assets
Municipal obligations	$	81	$	6	$	—	$	(62	)	$	—	$	25
Auction rate securities⁽¹⁾	86,802		3,574		11,775		(13,050		)	—		89,101
Interest rate lock commitments ⁽²⁾	9,161		4,292		—		—			—		13,453
Investments	157		1		—		—			—		158
ARS purchase commitments ⁽³⁾	—		911		—		—			—		911
Liabilities
Interest rate lock commitments ⁽²⁾	923		923		—		—			—		—
ARS purchase commitments ⁽³⁾	1,369		1,227		—		—			—		142


(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 are attributable to assets or liabilities that are still held at the reporting date.

Assets and Liabilities Not Measured at Fair Value on Recurring Basis

s trade.

Assets and liabilities not measured at fair value as of June 30, 2017



(Expressed in thousands)
			Fair Value Measurement: Assets
	Carrying Value		Level 1		Level 2		Level 3		Total
Cash	$	41,120	$	41,120	$	—	$	—	$	41,120
Deposits with clearing organization	13,299		13,299		—		—		13,299
Receivable from brokers, dealers and clearing organizations:
Securities borrowed	158,454		—		158,454		—		158,454
Receivables from brokers	25,095		—		25,095		—		25,095
Securities failed to deliver	15,147		—		15,147		—		15,147
Clearing organizations	22,700		—		22,700		—		22,700
Other	3,310		—		3,310		—		3,310
	224,706		—		224,706		—		224,706
Receivable from customers	873,815		—		873,815		—		873,815
Securities purchased under agreements to resell	1,235		1,235		—		—		1,235
Investments ⁽¹⁾	60,131		—		60,131		—		60,131


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



(Expressed in thousands)
			Fair Value Measurement: Liabilities
	Carrying Value		Level 1		Level 2		Level 3		Total
Drafts payable	$	29,767	$	29,767	$	—	$	—	$	29,767
Bank call loans	230,400		—		230,400		—		230,400
Payables to brokers, dealers and clearing organizations:
Securities loaned	141,654		—		141,654		—		141,654
Payable to brokers	17,976		—		17,976		—		17,976
Securities failed to receive	34,421		—		34,421		—		34,421
Other	45,527		—		45,527		—		45,527
	239,578		—		239,578		—		239,578
Payables to customers	498,562		—		498,562		—		498,562
Securities sold under agreements to repurchase	457,809		—		457,809		—		457,809
Senior secured notes	200,000		—		200,042		—		200,042

Assets and liabilities not measured at fair value as of December 31, 2016



(Expressed in thousands)
			Fair Value Measurement: Assets
	Carrying Value		Level 1		Level 2		Level 3		Total
Cash	$	48,671	$	48,671	$	—	$	—	$	48,671
Deposits with clearing organization	11,748		11,748		—		—		11,748
Receivable from brokers, dealers and clearing organizations:
Securities borrowed	154,090		—		154,090		—		154,090
Receivables from brokers	25,768		—		25,768		—		25,768
Securities failed to deliver	6,172		—		6,172		—		6,172
Clearing organizations	26,081		—		26,081		—		26,081
Other	2,823		—		2,823		—		2,823
	214,934		—		214,934		—		214,934
Receivable from customers	847,386		—		847,386		—		847,386
Investments ⁽¹⁾	56,300		—		56,300		—		56,300


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



(Expressed in thousands)
			Fair Value Measurement: Liabilities
	Carrying Value		Level 1		Level 2		Level 3		Total
Drafts payable	$	39,228	$	39,228	$	—	$	—	$	39,228
Bank call loans	145,800		—		145,800		—		145,800
Payables to brokers, dealers and clearing organizations:
Securities loaned	179,875		—		179,875		—		179,875
Payable to brokers	610		—		610		—		610
Securities failed to receive	11,523		—		11,523		—		11,523
Other	29,381		—		29,381		—		29,381
	221,389		—		221,389		—		221,389
Payables to customers	449,946		—		449,946		—		449,946
Securities sold under agreements to repurchase	378,084		—		378,084		—		378,084
Senior secured notes	150,000		—		151,782		—		151,782

Notional Amounts and Fair Values of Derivatives by Product

ue, net.

The notional amounts and fair values of the Company's derivatives as of June 30, 2017 and December 31, 2016 by product were as follows:



(Expressed in thousands)
	Fair Value of Derivative Instruments as of June 30, 2017
	Description	Notional		Fair Value
Assets:
Derivatives not designated as hedging instruments ⁽¹⁾
Other contracts	TBAs	$	314,255	$	1,257
	TBA sale contracts	62,358		1,644
	Forward start reverse repurchase agreements	129,000		—
		$	505,613	$	2,901
Liabilities:
Derivatives not designated as hedging instruments ⁽¹⁾
Commodity contracts	Futures	$	3,702,000	$	853
Other contracts	Foreign exchange forward contracts	400		8
	TBAs	309,555		1,180
	TBA purchase contracts	62,358		1,835
	Forward start repurchase agreements	574,000		—
	ARS purchase commitments	14,964		254
		$	4,663,277	$	4,130


(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 as of December 31, 2016
	Description	Notional		Fair Value
Assets:
Derivatives not designated as hedging instruments ⁽¹⁾
Other contracts	TBAs	$	169,500	$	332
	TBA sale contracts	121,573		482
	ARS purchase commitments	6,654		849
		$	297,727	$	1,663
Liabilities:
Derivatives not designated as hedging instruments ⁽¹⁾
Commodity contracts	Futures	$	4,059,000	$	166
Other contracts	Foreign exchange forward contracts	200		1
	TBAs	169,500		289
	TBA purchase contracts	121,573		923
	Forward start repurchase agreements	382,000		—
	ARS purchase commitments	24,358		645
		$	4,756,631	$	2,024


(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 in the condensed consolidated statements of operations for the three months ended June 30, 2017 and 2016:



(Expressed in thousands)
	The Effect of Derivative Instruments in the Statement of Operations
	For the Three Months Ended June 30, 2017
		Recognized in Income on Derivatives (pre-tax)
Types	Description	Location	Net Gain (Loss)
Commodity contracts	Futures	Principal transactions revenue	$	(8	)
Other contracts	Foreign exchange forward contracts	Other revenue	8
	TBAs	Principal transactions revenue	204
	TBA sale contracts	Other revenue	(1,644		)
	TBA purchase contracts	Other revenue	1,835
	ARS purchase commitments	Principal transactions revenue	(773		)
			$	(378	)



(Expressed in thousands)
	The Effect of Derivative Instruments in the Statement of Operations
	For the Three Months Ended June 30, 2016
		Recognized in Income on Derivatives (pre-tax)
Types	Description	Location	Net Loss
Commodity contracts	Futures	Principal transactions revenue	$	(1,306	)
Other contracts	Foreign exchange forward contracts	Other revenue	(6		)
	TBAs	Principal transactions revenue	(4		)
	TBA sale contracts	Other revenue	(228		)
	Interest rate lock commitments	Other revenue	(571		)
	ARS purchase commitments	Principal transactions revenue	(212		)
			$	(2,327	)

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 six months ended June 30, 2017 and 2016:



(Expressed in thousands)
	The Effect of Derivative Instruments in the Statement of Operations
	For the Six Months Ended June 30, 2017
		Recognized in Income on Derivatives (pre-tax)
Types	Description	Location	Net Gain (Loss)
Commodity contracts	Futures	Principal transactions revenue	$	234
Other contracts	Foreign exchange forward contracts	Other revenue	12
	TBAs	Principal transactions revenue	77
	TBA sale contracts	Other revenue	(1,860		)
	TBA purchase contracts	Other revenue	2,371
	ARS purchase commitments	Principal transactions revenue	(458		)
			$	376



(Expressed in thousands)
	The Effect of Derivative Instruments in the Statement of Operations
	For the Six Months Ended June 30, 2016
		Recognized in Income on Derivatives (pre-tax)
Types	Description	Location	Net Gain (Loss)
Commodity contracts	Futures	Principal transactions revenue	$	(3,061	)
Other contracts	Foreign exchange forward contracts	Other revenue	11
	TBAs	Principal transactions revenue	(13		)
	TBA sale contracts	Other revenue	(8,129		)
	Interest rate lock commitments	Other revenue	5,215
	ARS purchase commitments	Principal transactions revenue	2,138
			$	(3,839	)