Fair value measurements (Tables)

9 Months Ended

Sep. 30, 2019

The following table provides information about the Company's investments in Company-sponsored funds as of September 30, 2019:



(Expressed in thousands)
	Fair Value		Unfunded Commitments		Redemption Frequency	Redemption Notice Period
Hedge funds ⁽¹⁾	$	1,577	$	—	Quarterly - Annually	30 - 120 Days
Private equity funds ⁽²⁾	4,335		1,399		N/A	N/A
	$	5,912	$	1,399


(1)	Includes investments in hedge funds and hedge fund of funds that pursue long/short, event-driven,

and activist strategies.


(2)	Includes private equity funds and private equity fund of funds with a focus on diversified portfolios,

real estate and global natural resources.

Assets and Liabilities Measured at Fair Value on Recurring Basis

bilities, recorded at fair value on a recurring basis as of September 30, 2019 and December 31, 2018, 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 September 30, 2019



(Expressed in thousands)
	Fair Value Measurements as of September 30, 2019
	Level 1		Level 2		Level 3		Total
Assets
Deposits with clearing organizations	$	36,461	$	—	$	—	$	36,461
Securities owned:
U.S. Treasury securities	462,298		—		—		462,298
U.S. Agency securities	1,605		7,135		—		8,740
Sovereign obligations	—		2,571		—		2,571
Corporate debt and other obligations	—		24,448		—		24,448
Mortgage and other asset-backed securities	—		2,292		—		2,292
Municipal obligations	—		66,550		—		66,550
Convertible bonds	—		28,796		—		28,796
Corporate equities	31,822		—		—		31,822
Money markets	363		—		—		363
Auction rate securities	—		25,314		—		25,314
Securities owned, at fair value	496,088		157,106		—		653,194
Derivative contracts:
TBAs	—		12		—		12
Total	$	532,549	$	157,118	$	—	$	689,667
Liabilities
Securities sold but not yet purchased:
U.S. Treasury securities	$	74,020	$	—	$	—	$	74,020
U.S. Agency securities	—		7		—		7
Sovereign obligations	—		2,503		—		2,503
Corporate debt and other obligations	—		11,683		—		11,683
Mortgage and other asset-backed securities	—		1		—		1
Convertible bonds	—		16,216		—		16,216
Corporate equities	17,450		—		—		17,450
Securities sold but not yet purchased, at fair value	91,470		30,410		—		121,880
Derivative contracts:
Futures	322		—		—		322
TBAs	—		9		—		9
ARS purchase commitments	—		1,006		—		1,006
Derivative contracts, total	322		1,015		—		1,337
Total	$	91,792	$	31,425	$	—	$	123,217

(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, 2018



(Expressed in thousands)
	Fair Value Measurements as of December 31, 2018
	Level 1		Level 2		Level 3		Total
Assets
Cash equivalents	$	10,500	$	—	$	—	$	10,500
Deposits with clearing organizations	34,599		—		—		34,599
Securities owned:
U.S. Treasury securities	657,208		—		—		657,208
U.S. Agency securities	812		6,494		—		7,306
Sovereign obligations	—		214		—		214
Corporate debt and other obligations	—		20,665		—		20,665
Mortgage and other asset-backed securities	—		2,486		—		2,486
Municipal obligations	—		52,261		—		52,261
Convertible bonds	—		31,270		—		31,270
Corporate equities	28,215		—		—		28,215
Money markets	7		—		—		7
Auction rate securities	—		16,253		21,699		37,952
Securities owned, at fair value	686,242		129,643		21,699		837,584
Investments ⁽¹⁾	—		—		101		101
Derivative contracts:
TBAs	—		4,873		—		4,873
Total	$	731,341	$	134,516	$	21,800	$	887,657
Liabilities
Securities sold but not yet purchased:
U.S. Treasury securities	$	53,646	$	—	$	—	$	53,646
U.S. Agency securities	—		3		—		3
Sovereign obligations	—		78		—		78
Corporate debt and other obligations	—		7,236		—		7,236
Convertible bonds	—		9,709		—		9,709
Corporate equities	14,774		—		—		14,774
Securities sold but not yet purchased, at fair value	68,420		17,026		—		85,446
Derivative contracts:
Futures	807		—		—		807
Foreign exchange forward contracts	4		—		—		4
TBAs	—		4,873		—		4,873
ARS purchase commitments	—		1,096		—		1,096
Derivative contracts, total	811		5,969		—		6,780
Total	$	69,231	$	22,995	$	—	$	92,226

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

For the three months ended September 30, 2019, there were no balances or changes in Level 3 assets and liabilities.

The following table presents

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

es in Level 3 assets and liabilities measured at fair value on a recurring basis for the three months ended September 30, 2018:



(Expressed in thousands)
	Level 3 Assets and Liabilities
	For the Three Months Ended September 30, 2018
	Beginning Balance		Total Realized and Unrealized Losses ⁽³⁾⁽⁴⁾			Purchases and Issuances		Sales and Settlements			Transfers In/Out			Ending Balance


Assets
Auction rate securities ⁽¹⁾⁽⁵⁾	$	72,621	$	(2,163	)	$	2,150	$	(34,925	)	$	(16,253	)	$	21,430
Investments	164		—			—		—			(60		)	104
Liabilities
ARS purchase commitments ⁽²⁾⁽⁵⁾	131		(948		)	—		—			1,078			1


(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 income, except for losses

from investments which are included in other income in the condensed consolidated statement of income.


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


(5)	Represents transfers from Level 3 to Level 2 of the fair value hierarchy. Transfers were due to tender

offers by issuers of ARS.

The following tables present changes in Level 3 assets and liabilities measured at fair value on a recurring basis for the nine months ended September 30, 2019 and 2018:



(Expressed in thousands)
	Level 3 Assets and Liabilities
	For the Nine Months Ended September 30, 2019
	Beginning Balance		Total Realized and Unrealized Gains ⁽²⁾⁽³⁾		Purchases and Issuances		Sales and Settlements			Transfers Out			Ending Balance


Assets
Auction rate securities ⁽¹⁾	$	21,699	$	1	$	—	$	(350	)	$	(21,350	)	$	—
Investments	101		5		—		—			(106		)	—


(1)	Represents auction rate preferred securities that failed in the auction rate market.


(2)	Included in principal transactions in the condensed consolidated statement of income, except for

gains from investments which are included in other income in the condensed consolidated

statement of income.


(3)	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 Nine Months Ended September 30, 2018
	Beginning Balance		Total Realized and Unrealized Gains (Losses) ⁽³⁾⁽⁴⁾			Purchases and Issuances		Sales and Settlements			Transfers In/Out			Ending Balance


Assets
Municipal obligations	$	35	$	14		$	76	$	(125	)	$	—		$	—
Auction rate securities ^{(1) (5)}	87,398		(2,218		)	6,250		(36,145		)	(33,855		)	21,430
Investments	169		(5		)	—		—			(60		)	104
Liabilities
ARS purchase commitments ^{(2) (5)}	8		(1,162		)	—		—			1,169			1


(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 income, except

for gains (losses) from investments which are included in other income in the condensed

consolidated statement of income.


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


(5)	Represents transfers from Level 3 to Level 2 of the fair value hierarchy. Transfers were due to tender

offers by issuers of ARS.

Financial Instruments Not M

Financial Instruments, Estimate Not Practicable, Fair Value

d at fair value as of September 30, 2019



(Expressed in thousands)			Fair Value Measurement: Assets
	Carrying Value		Level 1		Level 2		Level 3		Total
Cash	$	26,193	$	26,193	$	—	$	—	$	26,193
Deposits with clearing organization	37,269		37,269		—		—		37,269
Receivable from brokers, dealers and clearing organizations:
Securities borrowed	103,738		—		103,738		—		103,738
Receivables from brokers	13,839		—		13,839		—		13,839
Securities failed to deliver	13,362		—		13,362		—		13,362
Clearing organizations	24,775		—		24,775		—		24,775
Other	2,017		—		2,017		—		2,017
	157,731		—		157,731		—		157,731
Receivable from customers	754,927		—		754,927		—		754,927
Notes receivable, net	43,920		—		43,920		—		43,920
Investments ⁽¹⁾	68,919		—		68,919		—		68,919

(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	$	17,794	$	17,794	$	—	$	—	$	17,794
Payables to brokers, dealers and clearing organizations:
Securities loaned	209,298		—		209,298		—		209,298
Payable to brokers	7,040		—		7,040		—		7,040
Securities failed to receive	13,228		—		13,228		—		13,228
Other	134,707		—		134,707		—		134,707
	364,273		—		364,273		—		364,273
Payables to customers	313,056		—		313,056		—		313,056
Securities sold under agreements to repurchase	253,720		—		253,720		—		253,720
Senior secured notes	150,000		—		154,907		—		154,907

Assets and liabilities not measured at fair value as of December 31, 2018



(Expressed in thousands)			Fair Value Measurement: Assets
	Carrying Value		Level 1		Level 2		Level 3		Total
Cash	$	80,175	$	80,175	$	—	$	—	$	80,175
Deposits with clearing organization	33,079		33,079		—		—		33,079
Receivable from brokers, dealers and clearing organizations:
Securities borrowed	108,144		—		108,144		—		108,144
Receivables from brokers	20,140		—		20,140		—		20,140
Securities failed to deliver	7,021		—		7,021		—		7,021
Clearing organizations	28,777		—		28,777		—		28,777
Other	2,411		—		2,411		—		2,411
	166,493		—		166,493		—		166,493
Receivable from customers	720,777		—		720,777		—		720,777
Securities purchased under agreements to resell	290		—		290		—		290
Notes receivable, net	44,058		—		44,058		—		44,058
Investments ⁽¹⁾	59,765		—		59,765		—		59,765

(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	$	16,348	$	16,348	$	—	$	—	$	16,348
Bank call loans	15,000		—		15,000		—		15,000
Payables to brokers, dealers and clearing organizations:
Securities loaned	146,815		—		146,815		—		146,815
Payable to brokers	158		—		158		—		158
Securities failed to receive	27,799		—		27,799		—		27,799
Other	113,628		—		113,628		—		113,628
	288,400		—		288,400		—		288,400
Payables to customers	336,616		—		336,616		—		336,616
Securities sold under agreements to repurchase	484,218		—		484,218		—		484,218
Senior secured notes	200,000		—		199,722		—		199,722

Fair Value Option

The Compa

Notional Amounts and Fair Values of Derivatives by Product

es of the Company's derivatives as of September 30, 2019 and December 31, 2018 by product were as follows:



(Expressed in thousands)
	Fair Value of Derivative Instruments as of September 30, 2019
	Description	Notional		Fair Value
Assets:
Derivatives not designated as hedging instruments⁽¹⁾
Other contracts	TBAs	$	15,742	$	12
		$	15,742	$	12
Liabilities:
Derivatives not designated as hedging instruments ⁽¹⁾
Commodity contracts	Futures	$	2,846,000	$	322
Other contracts	TBAs	12,240		9
	ARS purchase commitments	7,010		1,006
		$	2,865,250	$	1,337


(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, 2018
	Description	Notional		Fair Value
Assets:
Derivatives not designated as hedging instruments ⁽¹⁾
Other contracts	TBAs	$	729,500	$	4,873
		$	729,500	$	4,873
Liabilities:
Derivatives not designated as hedging instruments⁽¹⁾
Commodity contracts	Futures	$	4,580,800	$	807
Other contracts	Foreign exchange forward contracts	200		4
	TBAs	729,500		4,873
	ARS purchase commitments	7,305		1,096
		$	5,317,805	$	6,780


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

thus the related amounts are not offset.

The following table presents the

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

the location and fair value amounts of the Company's derivative instruments and their effect in the condensed consolidated statements of income for the three and nine months ended September 30, 2019 and 2018:



(Expressed in thousands)
	The Effect of Derivative Instruments in the Income Statement
	For the Three Months Ended September 30, 2019
		Recognized in Income on Derivatives (pre-tax)
Types	Description	Location	Net Gain (Loss)
Commodity contracts	Futures	Principal transactions revenue	$	(443	)
Other contracts	Foreign exchange forward contracts	Other revenue	5
	TBAs	Principal transactions revenue	(9		)
	ARS purchase commitments	Principal transactions revenue	(242		)
			$	(689	)

(Expressed in thousands)
	The Effect of Derivative Instruments in the Income Statement
	For the Three Months Ended September 30, 2018
		Recognized in Income on Derivatives (pre-tax)
Types	Description	Location	Net Gain (Loss)
Commodity contracts	Futures	Principal transactions revenue	$	413
Other contracts	Foreign exchange forward contracts	Other revenue	2
	TBAs	Principal transactions revenue	73
	Other TBAs	Other revenue	62
	ARS purchase commitments	Principal transactions revenue	(857		)
			$	(307	)



(Expressed in thousands)
	The Effect of Derivative Instruments in the Income Statement
	For the Nine Months Ended September 30, 2019
		Recognized in Income on Derivatives (pre-tax)
Types	Description	Location	Net Gain (Loss)
Commodity contracts	Futures	Principal transactions revenue	$	(3,109	)
Other contracts	Foreign exchange forward contracts	Other revenue	15
	TBAs	Principal transactions revenue	(85		)
	ARS purchase commitments	Principal transactions revenue	90
			$	(3,089	)

(Expressed in thousands)
	The Effect of Derivative Instruments in the Income Statement
	For the Nine Months Ended September 30, 2018
		Recognized in Income on Derivatives (pre-tax)
Types	Description	Location	Net Gain (Loss)
Commodity contracts	Futures	Principal transactions revenue	$	1,764
Other contracts	Foreign exchange forward contracts	Other revenue	(3		)
	TBAs	Principal transactions revenue	269
	Other TBAs	Other revenue	209
	ARS purchase commitments	Principal transactions revenue	(1,071		)
			$	1,168