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Fair value measurements (Tables)

6 Months Ended

Jun. 30, 2020

The following table provides information about the Company's investments in Company-sponsored funds as of June 30, 2020:



(Expressed in thousands)
	Fair Value		Unfunded Commitments		Redemption Frequency	Redemption Notice Period
Hedge funds ⁽¹⁾	$	1,089	$	—	Quarterly - Annually	30 - 120 Days
Private equity funds ⁽²⁾	3,627		1,238		N/A	N/A
	$	4,716	$	1,238


(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 June 30, 2020 and December 31, 2019, 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, 2020:



(Expressed in thousands)
	Fair Value Measurements as of June 30, 2020
	Level 1		Level 2		Level 3		Total
Assets
Deposits with clearing organizations	$	35,125	$	—	$	—	$	35,125
Securities owned:
U.S. Treasury securities	317,509		—		—		317,509
U.S. Agency securities	14,106		6,397		—		20,503
Sovereign obligations	—		4,675		—		4,675
Corporate debt and other obligations	2,238		14,587		—		16,825
Mortgage and other asset-backed securities	—		2,437		—		2,437
Municipal obligations	—		60,403		—		60,403
Convertible bonds	—		17,851		—		17,851
Corporate equities	30,734		—		—		30,734
Money markets	1,526		—		—		1,526
Auction rate securities	—		—		29,566		29,566
Securities owned, at fair value	366,113		106,350		29,566		502,029
Derivative contracts:
TBAs	—		32		—		32
Total	$	401,238	$	106,382	$	29,566	$	537,186
Liabilities
Securities sold but not yet purchased:
U.S. Treasury securities	$	304,632	$	—	$	—	$	304,632
U.S. Agency securities	—		1,361		—		1,361
Sovereign obligations	—		3,561		—		3,561
Corporate debt and other obligations	1,768		7,837		—		9,605
Convertible bonds	—		11,015		—		11,015
Corporate equities	26,415		—		—		26,415
Securities sold but not yet purchased, at fair value	332,815		23,774		—		356,589
Derivative contracts:
Futures	397		—		—		397
Foreign exchange forward contracts	17		—		—		17
TBAs	—		40		—		40
ARS purchase commitments	—		—		332		332
Derivative contracts, total	414		40		332		786
Total	$	333,229	$	23,814	$	332	$	357,375

Assets and liabilities measured at fair value on a recurring basis as of December 31, 2019:



(Expressed in thousands)
	Fair Value Measurements as of December 31, 2019
	Level 1		Level 2		Level 3		Total
Assets
Deposits with clearing organizations	$	25,118	$	—	$	—	$	25,118
Securities owned:
U.S. Treasury securities	613,030		—		—		613,030
U.S. Agency securities	19,917		15,974		—		35,891
Sovereign obligations	—		11,405		—		11,405
Corporate debt and other obligations	—		8,310		—		8,310
Mortgage and other asset-backed securities	—		2,697		—		2,697
Municipal obligations	—		40,260		—		40,260
Convertible bonds	—		29,816		—		29,816
Corporate equities	32,215		—		—		32,215
Money markets	781		—		—		781
Auction rate securities	—		25,314		—		25,314
Securities owned, at fair value	665,943		133,776		—		799,719
Total	$	691,061	$	133,776	$	—	$	824,837
Liabilities
Securities sold but not yet purchased:
U.S. Treasury securities	$	52,882	$	—	$	—	$	52,882
U.S. Agency securities	—		18		—		18
Sovereign obligations	—		6,405		—		6,405
Corporate debt and other obligations	—		664		—		664
Mortgage and other asset-backed securities	—		18,624		—		18,624
Corporate equities	21,978		—		—		21,978
Securities sold but not yet purchased, at fair value	74,860		25,711		—		100,571
Derivative contracts:
Futures	267		—		—		267
TBAs	—		124		—		124
ARS purchase commitments	—		1,023		—		1,023
Derivative contracts, total	267		1,147		—		1,414
Total	$	75,127	$	26,858	$	—	$	101,985

The following tables present changes in Level 3 assets and liabilities measured at fair value on a recurring basis for the three and six months ended June 30, 2020 and 2019:

(Expressed in thousands)

Level 3 Assets and Liabilities

For the Three Months Ended June 30, 2020

Total Realized

Beginning

and Unrealized

Purchases

Sales and

Transfers

Ending

Balance

Gains

and Issuances

Settlements

In (Out)

Balance

Assets

Auction rate securities ^{(1) (2)}

—

29,566

Liabilities

ARS Purchase Commitments ^{(1) (3)}

—

332

(1) Transferred to Level 3 of the fair value hierarchy due to the illiquid nature of the securities as result of the length of time since the last tender offer.

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

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



(Expressed in thousands)
	Level 3 Assets and Liabilities
	For the Three Months Ended June 30, 2019
		Total Realized
	Beginning	and Unrealized	Purchases	Sales and		Transfers		Ending
	Balance	Gains⁽³⁾⁽⁴⁾	and Issuances	Settlements		In (Out)		Balance
Assets
Auction rate securities ^{(1) (2)}	21,700	—	—	(350	)	(21,350	)	—
Investments	104	2	—	—		(106	)	—

(1) Transferred to Level 2 of the fair value hierarchy as a result of recent tender offer activities.

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

(3) 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.

(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, 2020

Total Realized

Beginning

and Unrealized

Purchases

Sales and

Transfers

Ending

Balance

Gains

and Issuances

Settlements

In (Out)

Balance

Assets

Auction rate securities^{(1) (2)}

—

29,566

Liabilities

ARS Purchase Commitments ^{(1) (3)}

—

332

(1) Transferred to Level 3 of the fair value hierarchy due to the illiquid nature of the securities as result of the length of time since the last tender offer.

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

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



(Expressed in thousands)
	Level 3 Assets and Liabilities
	For the Six Months Ended June 30, 2019
		Total Realized
	Beginning	and Unrealized	Purchases	Sales and		Transfers		Ending
	Balance	Gains⁽³⁾⁽⁴⁾	and Issuances	Settlements		In (Out)		Balance
Assets
Auction rate securities ^{(1) (2)}	21,699	1	—	(350	)	(21,350	)	—
Investments	101	5	—	—		(106	)	—

(1) Transferred to Level 2 of the fair value hierarchy as a result of recent tender offer activities.

Financial Instruments, Estimate Not Practicable, Fair Value

d at fair value as of June 30, 2020:



(Expressed in thousands)			Fair Value Measurement: Assets
	Carrying Value		Level 1		Level 2		Level 3		Total
Cash	$	51,237	$	51,237	$	—	$	—	$	51,237
Deposits with clearing organization	55,411		55,411		—		—		55,411
Receivable from brokers, dealers and clearing organizations:
Securities borrowed	126,888		—		126,888		—		126,888
Receivables from brokers	28,119		—		28,119		—		28,119
Securities failed to deliver	24,717		—		24,717		—		24,717
Clearing organizations	31,361		—		31,361		—		31,361
Other	104,870		—		104,870		—		104,870
	315,955		—		315,955		—		315,955
Receivable from customers	860,140		—		860,140		—		860,140
Notes receivable, net	44,114		—		44,114		—		44,114
Investments ⁽¹⁾	72,103		—		72,103		—		72,103

(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	$	37,374		$	37,374	$	—		$	—	$	37,374
Bank call loans	13,000			—		13,000			—		13,000
Payables to brokers, dealers and clearing organizations:
Securities loaned	204,339			—		204,339			—		204,339
Payable to brokers	352			—		352			—		352
Securities failed to receive	11,528			—		11,528			—		11,528
Other	(505		)	—		(505		)	—		(505		)
	215,714			—		215,714			—		215,714
Payables to customers	416,914			—		416,914			—		416,914
Securities sold under agreements to repurchase	154,155			—		154,155			—		154,155
Senior secured notes	148,574			—		151,231			—		151,231

Assets and liabilities not measured at fair value as of December 31, 2019:



(Expressed in thousands)			Fair Value Measurement: Assets
	Carrying Value		Level 1		Level 2		Level 3		Total
Cash	$	79,550	$	79,550	$	—	$	—	$	79,550
Deposits with clearing organization	23,297		23,297		—		—		23,297
Receivable from brokers, dealers and clearing organizations:
Securities borrowed	99,635		—		99,635		—		99,635
Receivables from brokers	19,024		—		19,024		—		19,024
Securities failed to deliver	7,173		—		7,173		—		7,173
Clearing organizations	36,269		—		36,269		—		36,269
Other	1,316		—		1,316		—		1,316
	163,417		—		163,417		—		163,417
Receivable from customers	796,934		—		796,934		—		796,934
Notes receivable, net	43,670		—		43,670		—		43,670
Investments ⁽¹⁾	73,971		—		73,971		—		73,971

(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
Payables to brokers, dealers and clearing organizations:
Securities loaned	$	234,343	$	—	$	234,343	$	—	$	234,343
Payable to brokers	4,548		—		4,548		—		4,548
Securities failed to receive	14,603		—		14,603		—		14,603
Other	267,214		—		267,214		—		267,214
	520,708		—		520,708		—		520,708
Payables to customers	334,735		—		334,735		—		334,735
Securities sold under agreements to repurchase	287,265		—		287,265		—		287,265
Senior secured notes	150,000		—		154,988		—		154,988

Fair Value Option

The Compa

Notional Amounts and Fair Values of Derivatives by Product

es of the Company's derivatives as of June 30, 2020 and December 31, 2019 by product were as follows:



(Expressed in thousands)
	Fair Value of Derivative Instruments as of June 30, 2020
	Description	Notional		Fair Value
Assets:
Derivatives not designated as hedging instruments⁽¹⁾
Other contracts	TBAs	$	15,550	$	32
		$	15,550	$	32
Liabilities:
Derivatives not designated as hedging instruments ⁽¹⁾
Commodity contracts	Futures	$	2,285,000	$	397
Other contracts	Foreign exchange forward contracts	200		17
Other contracts	TBAs	15,550		40
	ARS purchase commitments	2,376		332
		$	2,303,126	$	786


(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, 2019
	Description	Notional		Fair Value
Liabilities:
Derivatives not designated as hedging instruments⁽¹⁾
Commodity contracts	Futures	$	5,209,000	$	267
Other contracts	TBAs	13,245		124
	ARS purchase commitments	7,128		1,023
		$	5,229,373	$	1,414


(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 income statements for the three and six months ended June 30, 2020 and 2019:



(Expressed in thousands)
	The Effect of Derivative Instruments in the Income Statement
	For the Three Months Ended June 30, 2020
		Recognized in Income on Derivatives (pre-tax)
Types	Description	Location	Net Gain (Loss)
Commodity contracts	Futures	Principal transactions revenue	$	(252	)
Other contracts	Foreign exchange forward contracts	Other revenue	20
	TBAs	Principal transactions revenue	(2		)
	ARS purchase commitments	Principal transactions revenue	555
			$	321

(Expressed in thousands)
	The Effect of Derivative Instruments in the Income Statement
	For the Three Months Ended June 30, 2019
		Recognized in Income on Derivatives (pre-tax)
Types	Description	Location	Net Gain (Loss)
Commodity contracts	Futures	Principal transactions revenue	$	(2,090	)
Other contracts	Foreign exchange forward contracts	Other revenue	(4		)
	TBAs	Principal transactions revenue	(86		)
	ARS purchase commitments	Principal transactions revenue	350
			$	(1,830	)