Fair value measurements (Tables)

12 Months Ended

Dec. 31, 2017

Dec. 31, 2016

Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]

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

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 December 31, 2017
Product	Principal		Valuation Adjustment		Fair Value		Valuation Technique	Unobservable Input	Range	Weighted Average
Auction Rate Securities Owned ⁽¹⁾
Auction Rate Preferred Securities	$	88,025	$	1,318	$	86,707	Discounted Cash Flow	Discount Rate ⁽²⁾	2.30% to 3.13%	2.74%
								Duration	4.0 Years	4.0 Years
								Current Yield ⁽³⁾	2.37% to 2.47%	2.41%
	11,725		—		11,725		Par ⁽⁷⁾	N/A	N/A	N/A
	13,400		670		12,730		Tender Offer ⁽⁸⁾	N/A	N/A	N/A
Municipal Auction Rate Securities	425		23		402		Discounted Cash Flow	Discount Rate ⁽⁴⁾	3.76%	3.76%
								Duration	4.5 Years	4.5 Years
								Current Yield ⁽³⁾	2.41%	2.41%
Student Loan Auction Rate Securities	300		11		289		Discounted Cash Flow	Discount Rate ⁽⁵⁾	3.53%	3.53%
								Duration	7.0 Years	7.0 Years
								Current Yield ⁽³⁾	2.93%	2.93%
	$	113,875	$	2,022	$	111,853
Auction Rate Securities Commitments to Purchase ⁽⁶⁾
Auction Rate Preferred Securities	$	10,992	$	8	$	10,984	Discounted Cash Flow	Discount Rate ⁽²⁾	2.30% to 3.13%	2.74%
								Duration	4.0 Years	4.0 Years
								Current Yield ⁽³⁾	2.37% to 2.47%	2.41%
	$	10,992	$	8	$	10,984
Total	$	124,867	$	2,030	$	122,837


(1)	Principal amount represents the par value of the ARS and is included in securities owned on the consolidated balance sheet as of December 31, 2017. The valuation adjustment amount is included as a reduction to securities owned on the consolidated balance sheet as of December 31, 2017.


(2)	Derived by applying a multiple to the spread between 110% to 150% to the U.S. Treasury rate of 2.09%.


(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 2.15%.


(5)	Derived by applying the sum of the spread of 1.20% to the U.S. Treasury rate of 2.33%.


(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 as of December 31, 2017.


(7)	ARS issuer announced redemption at par to take place during the first quarter of 2018. Included in Level 2 of the fair value hierarchy.


(8)	ARS issuer announced tender offer at 95% of par. Included in Level 2 of the fair value hierarchy.

Investments in Company-Sponsored Funds

The following table provides information about the Company's investments in Company-sponsored funds as of December 31, 2017:



(Expressed in thousands)
	Fair Value		Unfunded Commitments		Redemption Frequency	Redemption Notice Period
Hedge funds ⁽¹⁾	$	2,618	$	—	Quarterly - Annually	30 - 120 Days
Private equity funds ⁽²⁾	4,999		1,400		N/A	N/A
	$	7,617	$	1,400


(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, 2017 and 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 December 31, 2017



(Expressed in thousands)
	Fair Value Measurements as of December 31, 2017
	Level 1		Level 2		Level 3		Total
Assets
Cash equivalents	$	10,490	$	—	$	—	$	10,490
Deposits with clearing organizations	34,293		—		—		34,293
Securities owned:
U.S. Treasury securities	640,337		—		—		640,337
U.S. Agency securities	3,011		6,894		—		9,905
Sovereign obligations	—		608		—		608
Corporate debt and other obligations	—		12,538		—		12,538
Mortgage and other asset-backed securities	—		4,037		—		4,037
Municipal obligations	—		89,618		35		89,653
Convertible bonds	—		23,216		—		23,216
Corporate equities	34,067		—		—		34,067
Money markets	383		—		—		383
Auction rate securities	—		24,455		87,398		111,853
Securities owned, at fair value	677,798		161,366		87,433		926,597
Investments ⁽¹⁾	—		—		169		169
Derivative contracts:
TBAs	—		716		—		716
Total	$	722,581	$	162,082	$	87,602	$	972,265
Liabilities
Securities sold but not yet purchased:
U.S. Treasury securities	$	53,425	$	—	$	—	$	53,425
U.S. Agency securities	—		13		—		13
Sovereign obligations	—		1,179		—		1,179
Corporate debt and other obligations	—		4,357		—		4,357
Mortgage and other asset-backed securities	—		10		—		10
Convertible bonds	—		10,109		—		10,109
Corporate equities	25,393		—		—		25,393
Securities sold but not yet purchased, at fair value	78,818		15,668		—		94,486
Derivative contracts:
Futures	766		—		—		766
TBAs	—		614		—		614
ARS purchase commitments	—		—		8		8
Derivative contracts, total	766		614		8		1,388
Total	$	79,584	$	16,282	$	8	$	95,874

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

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 consolidated balance sheet.


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


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

During the year ended December 31, 2017, the Company transferred $24.5 million in ARS from Level 3 to Level 2 of the fair value hierarchy due to redemption and tender offer announcements by issuers of auction rate preferred securities. There were no transfers between any of the levels during the year ended December 31, 2016.

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, 2017 and 2016:



(Expressed in thousands)
	Level 3 Assets and Liabilities
	For the Year Ended December 31, 2017
	Beginning Balance		Total Realized and Unrealized Gains (Losses) ⁽³⁾⁽⁴⁾			Purchases and Issuances		Sales and Settlements			Transfers In (Out)			Ending Balance


Assets
Municipal obligations	$	44	$	(9	)	$	—	$	—		$	—		$	35
Auction rate securities ⁽¹⁾	84,926		1,177			27,225		(1,475		)	(24,455		)	87,398
Investments	158		11			—		—			—			169
ARS purchase commitments ⁽²⁾	849		(849		)	—		—			—			—
Liabilities
ARS purchase commitments ⁽²⁾	645		637			—		—			—			8


(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 consolidated statement of operations, except for gains from investments which are included in other income in the 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 Year Ended December 31, 2016
	Beginning Balance		Total Realized and Unrealized Gains ⁽⁴⁾⁽⁵⁾		Purchases and Issuances		Sales and Settlements			Transfers In (Out)		Ending Balance


Assets
Municipal obligations	$	81	$	25	$	—	$	(62	)	$	—	$	44
Auction rate securities ^(1)(6)(7)	86,802		1,974		13,775		(17,625		)	—		84,926
Interest rate lock commitments ⁽²⁾	9,161		4,345		—		(13,506		)	—		—
Investments	157		1		—		—			—		158
ARS purchase commitments ⁽³⁾	—		849		—		—			—		849
Liabilities
Interest rate lock commitments ⁽²⁾	923		923		—		—			—		—
ARS purchase commitments ⁽³⁾	1,369		724		—		—			—		645


(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 in the consolidated statement of operations, except for gains from investments which are included in other income in the consolidated statement of operations.


(5)	Unrealized gains 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.

Assets and Liabilities Not Measured at Fair Value on Recurring Basis

Assets and liabilities not measured at fair value as of December 31, 2017



(Expressed in thousands)			Fair Value Measurement: Assets
	Carrying Value		Level 1		Level 2		Level 3		Total
Cash	$	37,664	$	37,664	$	—	$	—	$	37,664
Cash segregated for regulatory and other purposes	—		—		—		—		—
Deposits with clearing organization	7,929		7,929		—		—		7,929
Receivable from brokers, dealers and clearing organizations:
Securities borrowed	132,368		—		132,368		—		132,368
Receivables from brokers	19,298		—		19,298		—		19,298
Securities failed to deliver	9,442		—		9,442		—		9,442
Clearing organizations	24,361		—		24,361		—		24,361
Other	930		—		930		—		930
	186,399		—		186,399		—		186,399
Receivable from customers	848,226		—		848,226		—		848,226
Securities purchased under agreements to resell	658				658		—		658
Notes receivable, net	40,520				40,520		—		40,520
Investments ⁽¹⁾	65,404		—		65,404		—		65,404


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



(Expressed in thousands)			Fair Value Measurement: Liabilities
	Carrying Value		Level 1		Level 2		Level 3		Total
Drafts payable	$	42,412	$	42,412	$	—	$	—	$	42,412
Bank call loans	118,300		—		118,300		—		118,300
Payables to brokers, dealers and clearing organizations:
Securities loaned	180,270		—		180,270		—		180,270
Payable to brokers	1,567		—		1,567		—		1,567
Securities failed to receive	17,559		—		17,559		—		17,559
Other	10,707		—		10,707		—		10,707
	210,103		—		210,103		—		210,103
Payables to customers	385,907		—		385,907		—		385,907
Securities sold under agreements to repurchase	586,478		—		586,478		—		586,478
Senior secured notes	200,000		—		206,380		—		206,380

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
Notes receivable, net	30,099				30,099				30,099
Investments ⁽¹⁾	56,300		—		56,300		—		56,300


(1)	Included in other assets on the 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

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



(Expressed in thousands)
	Fair Value of Derivative Instruments as of December 31, 2017
	Description	Notional		Fair Value
Assets:
Derivatives not designated as hedging instruments⁽¹⁾
Other contracts	TBAs	$	26,000	$	22
	Other TBAs ⁽²⁾	39,576		694
		$	65,576	$	716
Liabilities:
Derivatives not designated as hedging instruments ⁽¹⁾
Commodity contracts	Futures	$	5,844,000	$	766
Other contracts	TBAs	26,000		22
	Other TBAs ⁽²⁾	39,576		592
	ARS purchase commitments	10,992		8
		$	5,920,568	$	1,388


(1)	See "Derivative Instruments and Hedging Activities" above for a description of derivative financial instruments.


(2)	Represents TBA purchase and sale contracts related to the legacy OMHHF business.



(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
	Other TBAs ⁽²⁾	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
	Other TBAs ⁽²⁾	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 a description of derivative financial instruments.

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 consolidated statements of operations for the years ended December 31, 2017 and 2016:



(Expressed in thousands)
	The Effect of Derivative Instruments in the Statement of Operations
	For the Year Ended December 31, 2017
		Recognized in Income on Derivatives (pre-tax)
Types	Description	Location	Net Gain (Loss)
Commodity contracts	Futures	Principal transactions revenue	$	987
Other contracts	Foreign exchange forward contracts	Other revenue	12
	TBAs	Principal transactions revenue	(167		)
	Other TBAs	Other revenue	(338		)
	ARS purchase commitments	Principal transactions revenue	(212		)
			$	282

(Expressed in thousands)
	The Effect of Derivative Instruments in the Statement of Operations
	For the Year Ended December 31, 2016
		Recognized in Income on Derivatives (pre-tax)
Types	Description	Location	Net Gain (Loss)
Commodity contracts	Futures	Principal transactions revenue	$	(702	)
Other contracts	Foreign exchange forward contracts	Other revenue	13
	TBAs	Principal transactions revenue	43
	Other TBAs	Other revenue	(7,726		)
	Interest rate lock commitments	Other revenue	5,268
	ARS purchase commitments	Principal transactions revenue	1,573
			$	(1,531	)