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Fair value measurements

12 Months Ended

Dec. 31, 2023

Securities owned, securities sold but not yet purchased, investments and derivative contracts are carried at fair value with changes in fair value recognized in earnings each period.

Valuation Techniques

A description of the valuation techniques applied and inputs used in measuring the fair value of the Company's financial instruments is as follows:

U.S. Government Obligations

U.S. Treasury securities are valued using quoted market prices obtained from active market makers and inter-dealer brokers.

U.S. Agency Obligations

U.S. agency securities consist of agency issued debt securities and mortgage pass-through securities. Non-callable agency issued debt securities are generally valued using quoted market prices, quoted market prices for comparable securities or discounted cash flow models. Callable agency issued debt securities are valued by benchmarking model-derived prices to quoted market prices and trade data for identical or comparable securities. The fair value of mortgage pass-through securities are model driven with respect to spreads of the comparable to-be-announced ("TBA") security.

Sovereign Obligations

The fair value of sovereign obligations is determined based on quoted market prices when available or a valuation model that generally utilizes interest rate yield curves and credit spreads as inputs.

Corporate Debt and Other Obligations

The fair value of corporate bonds is estimated using recent transactions, broker quotations and bond spread information.

Mortgage and Other Asset-Backed Securities

The Company values non-agency securities collateralized by home equity and various other types of collateral based on external pricing and spread data provided by independent pricing services. When specific external pricing is not observable, the valuation is based on yields and spreads for comparable bonds.

Municipal Obligations

The fair value of municipal obligations is estimated using recently executed transactions, broker quotations, and bond spread information.

Convertible Bonds

The fair value of convertible bonds is estimated using recently executed transactions and dollar-neutral price quotations, where observable. When observable price quotations are not available, fair value is determined based on cash flow models using yield curves and bond spreads as key inputs.

Corporate Equities

Equity securities and options are generally valued based on quoted prices from the exchange or market where traded. To the extent quoted prices are not available, fair values are generally derived using bid/ask spreads.

Auction Rate Securities ("ARS")

As of December 31, 2023, the Company owned $2.7 million of ARS. This represents the amount that the Company holds as a result of ARS buybacks in previous years. The Company has valued the ARS securities owned at the tender offer price and categorized them in Level 3 of the fair value hierarchy due to the illiquid nature of the securities and the period of time since the last tender offer. The fair value of ARS is particularly sensitive to movements in interest rates. However, an increase or decrease in short-term interest rates may or may not result in a higher or lower tender offer in the future or the tender offer price may not provide a reasonable estimate of the fair value of the securities. In such cases, other valuation techniques might be necessary. As of December 31, 2023, the Company had a valuation allowance totaling $0.2 million relating to ARS owned (which is included as a reduction to securities owned on the consolidated balance sheet).

Investments

In its role as general partner in certain hedge funds and private equity funds, the Company, through its subsidiaries, holds direct investments in such funds. The Company records these investments within other assets and uses the net asset value of the underlying fund as a basis for estimating the fair value of its investment unless another method provides a better indicator of fair value. Changes in the fair value of these investments are reflected within other income in the consolidated financial statements.

The following table provides information about the Company's investments in Company-sponsored funds as of December 31, 2023:


(Expressed in thousands)
	Fair Value		Unfunded Commitments		Redemption Frequency	Redemption Notice Period
Hedge funds (1)	$	446	$	—	Quarterly - Annually	30 - 120 Days
Private equity funds (2)	5,072		2,367		N/A	N/A

	$	5,518	$	2,367

(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 diversified portfolios focusing on but not

limited to technology companies, venture capital and global natural resources.

The following table provides information about the Company's investments in Company-sponsored funds as of December 31, 2022:


(Expressed in thousands)
	Fair Value		Unfunded Commitments		Redemption Frequency	Redemption Notice Period
Hedge funds (1)	$	574	$	—	Quarterly - Annually	30 - 120 Days
Private equity funds (2)	8,221		3,018		N/A	N/A
	$	8,795	$	3,018

(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 diversified portfolios, focusing on but not

limited to technology companies, venture capital and global natural resources.

The Company owns an investment in a financial technologies firm. The Company elected the fair value option for this investment and it is included in other assets on the consolidated balance sheet. The Company determined the fair value of the investment based on an implied market-multiple approach and observable market data, including comparable company transactions. As of December 31, 2023, the fair value of the investment was $7.1 million and was categorized in Level 2 of the fair value hierarchy.

Assets and Liabilities Measured at Fair Value

The Company's assets and liabilities, recorded at fair value on a recurring basis, as of December 31, 2023 and 2022, 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, 2023


(Expressed in thousands)
	Fair Value Measurements as of December 31, 2023
	Level 1		Level 2		Level 3		Total
Assets

Deposits with clearing organizations	$	34,789	$	—	$	—	$	34,789
Securities owned:
U.S. Treasury securities	695,346		—		—		695,346
U.S. Agency securities	—		2		—		2

Corporate debt and other obligations	—		5,769		—		5,769
Mortgage and other asset-backed securities	—		6,627		—		6,627
Municipal obligations	—		35,333		—		35,333
Convertible bonds	—		16,735		—		16,735
Corporate equities	27,170		—		—		27,170
Money markets	5,400		217		—		5,617
Auction rate securities	—		—		2,713		2,713
Securities owned, at fair value	727,916		64,683		2,713		795,312
Investments (1)	1,872		16,913		—		18,785
Securities purchased under agreements to resell	—		5,842		—		5,842
Derivative contracts:
Futures	2		—		—		2
TBAs	—		11		—		11
Derivative contracts, total	$	2	$	11	$	—	$	13
Total	$	764,579	$	87,449	$	2,713	$	854,741
Liabilities

U.S. Treasury securities	$	14,603	$	—	$	—	$	14,603


Corporate debt and other obligations	—		1,508		—		1,508
Mortgage and other asset-backed securities	—		2		—		2

Convertible bonds	—		2,136		—		2,136
Corporate equities	13,427		—		—		13,427

Securities sold but not yet purchased, at fair value	28,030		3,646		—		31,676

Derivative contracts:
Futures	735		—		—		735

TBAs	—		2		—		2

Derivative contracts, total	735		2		—		737
Total	$	28,765	$	3,648	$	—	$	32,413

(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, 2022


(Expressed in thousands)
	Fair Value Measurements as of December 31, 2022
	Level 1		Level 2		Level 3		Total
Assets


Deposits with clearing organizations	$	24,937	$	—	$	—	$	24,937
Securities owned:
U.S. Treasury securities	362,815		—		—		362,815
U.S. Agency securities	—		6,012		—		6,012
Sovereign obligations	—		9,502		—		9,502
Corporate debt and other obligations	—		9,844		—		9,844
Mortgage and other asset-backed securities	—		1,882		—		1,882
Municipal obligations	—		30,126		—		30,126
Convertible bonds	—		21,800		—		21,800
Corporate equities	24,837		—		—		24,837

Auction rate securities	—		—		31,776		31,776
Securities owned, at fair value	387,652		79,166		31,776		498,594
Investments (1)	—		7,068		—		7,068


Derivative contracts:
TBAs	—		1,762		—		1,762


Total	$	412,589	$	87,996	$	31,776	$	532,361
Liabilities
Securities sold but not yet purchased:
U.S. Treasury securities	$	25,006	$	—	$	—	$	25,006
U.S. Agency securities	—		3		—		3
Sovereign obligations	—		9,048		—		9,048
Corporate debt and other obligations	—		2,905		—		2,905


Convertible bonds	—		4,428		—		4,428
Corporate equities	11,378		—		—		11,378

Securities sold but not yet purchased, at fair value	36,384		16,384		—		52,768

Derivative contracts:
Futures	44		—		—		44

TBAs	—		1,761		—		1,761


Derivative contracts, total	44		1,761		—		1,805
Total	$	36,428	$	18,145	$	—	$	54,573

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

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, 2023 and 2022:


(Expressed in thousands)
	Level 3 Assets and Liabilities
	For the Year Ended December 31, 2023
	Beginning Balance		Total Realized and Unrealized Gains (2)		Purchases and Issuances		Sales and Settlements		Transfers In / (Out)		Ending Balance

Assets
Auction rate securities (1)	$	31,776	$	3,159	$	—	$	(32,222)	$	—	$	2,713

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

(2) Included in principal transactions in the consolidated income statement.


(Expressed in thousands)
	Level 3 Assets and Liabilities
	For the Year Ended December 31, 2022
	Beginning Balance		Total Realized and Unrealized Losses(2)		Purchases and Issuances		Sales and Settlements		Transfers In / (Out)		Ending Balance

Assets
Auction rate securities (1)	$	31,804	$	(28)	$	1,375	$	(1,375)	$	—	$	31,776

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

(2) Included in principal transactions in the consolidated income statement.

Financial Instruments Not Measured at Fair Value

The table below presents the carrying value, fair value and fair value hierarchy category of certain financial instruments that are not measured at fair value on the consolidated balance sheets. The table below excludes non-financial assets and liabilities (e.g., furniture, equipment and leasehold improvements and accrued compensation).

The carrying value of financial instruments not measured at fair value categorized in the fair value hierarchy as Level 1 or Level 2 (e.g., cash and receivables from customers) approximates fair value because of the relatively short-term nature of the underlying assets. The fair value of the Company's senior secured notes, categorized in Level 2 of the fair value hierarchy, is based on quoted prices from the market in which the notes trade.

Assets and liabilities not measured at fair value as of December 31, 2023


(Expressed in thousands)			Fair Value Measurement: Assets
	Carrying Value		Level 1		Level 2		Level 3		Total
Cash and cash equivalents	$	28,835	$	28,835	$	—	$	—	$	28,835

Deposits with clearing organization	43,917		43,917		—		—		43,917
Receivable from brokers, dealers and clearing organizations:
Securities borrowed	158,612		—		158,612		—		158,612
Receivables from brokers	65,639		—		65,639		—		65,639
Securities failed to deliver	29,656		—		29,656		—		29,656
Clearing organizations and Other	30,780		—		30,780		—		30,780

	$	284,687	—		$	284,687	—		$	284,687
Receivable from customers	1,059,892		—		1,059,892		—		1,059,892

Notes receivable, net	62,640		—		62,640		—		62,640
Investments (1)	90,999		—		90,999		—		90,999

(1) The cash surrender value of Company-owned life insurance policies, which fluctuates based on changes in fair

value of the policies’ underlying investments, comprises approximately $89 million of this balance. This balance

is included within 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	$	9,002	$	9,002	$	—	$	—	$	9,002

Payables to brokers, dealers and clearing organizations:
Securities loaned	$	284,987	—		$	284,987	—		$	284,987
Payable to brokers	447		—		447		—		447
Securities failed to receive	23,809		—		23,809		—		23,809
Clearing Organizations and Other	51,912		—		51,912		—		51,912
	$	361,155	—		$	361,155	—		$	361,155
Payables to customers	369,287		—		369,287		—		369,287
Securities sold under agreements to repurchase	640,382		—		640,382		—		640,382
Senior secured notes	113,050		—		109,838		—		109,838

Assets and liabilities not measured at fair value as of December 31, 2022


(Expressed in thousands)			Fair Value Measurement: Assets
	Carrying Value		Level 1		Level 2		Level 3		Total
Cash and cash equivalents	$	112,433	$	112,433	$	—	$	—	$	112,433
Restricted cash	25,534		25,534		—		—		25,534
Deposits with clearing organization	52,754		52,754		—		—		52,754
Receivable from brokers, dealers and clearing organizations:
Securities borrowed	127,817		—		127,817		—		127,817
Receivables from brokers	49,125		—		49,125		—		49,125
Securities failed to deliver	9,099		—		9,099		—		9,099
Clearing organizations	20,035		—		20,035		—		20,035

	206,076		—		206,076		—		206,076
Receivable from customers	1,202,764		—		1,202,764		—		1,202,764

Notes receivable, net	57,495		—		57,495		—		57,495
Investments (1)	79,322		—		79,322		—		79,322

(1) The cash surrender value of Company-owned life insurance policies, which fluctuates based on changes in fair

value of the policies’ underlying investments, comprises approximately $77 million of this balance. This balance

is included within other assets on the 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	$	320,843	$	—	$	320,843	$	—	$	320,843
Payable to brokers	123		—		123		—		123
Securities failed to receive	62,646		—		62,646		—		62,646
Other	166,350		—		166,350		—		166,350
	549,962		—		549,962		—		549,962
Payables to customers	456,475		—		456,475		—		456,475
Securities sold under agreements to repurchase	161,009		—		161,009		—		161,009

Senior secured notes	114,050		—		113,233		—		113,233

Derivative Instruments and Hedging Activities

The Company transacts, on a limited basis, in exchange traded and over-the-counter derivatives for both asset and liability management as well as for trading and investment purposes. Risks managed using derivative instruments include interest rate risk and, to a lesser extent, foreign exchange risk. All derivative instruments are measured at fair value and are recognized as either assets or liabilities on the consolidated balance sheet.

Foreign exchange hedges

From time to time, the Company also utilizes forward and options contracts to hedge the foreign currency risk associated with compensation obligations to Oppenheimer Israel (OPCO) Ltd. employees denominated in New Israeli Shekel ("NIS"). Such hedges have not been designated as accounting hedges. Unrealized gains and losses on foreign exchange forward contracts are recorded in other assets or other liabilities on the consolidated balance sheet and other income in the consolidated income statement.

Derivatives used for trading and investment purposes

Futures contracts represent commitments to purchase or sell securities or other commodities at a future date and at a specified price. Market risk exists with respect to these instruments. Notional or contractual amounts are used to express the volume of these transactions and do not represent the amounts potentially subject to market risk. The Company uses futures contracts, including U.S. Treasury notes, Federal Funds, General Collateral futures and Eurodollar contracts primarily as an economic hedge of interest rate risk associated with government trading activities. Unrealized gains and losses on futures contracts are recorded on the consolidated balance sheet in payable to brokers, dealers and clearing organizations and in the consolidated income statement as principal transactions revenue, net.

To-be-announced securities

The Company also transacts in pass-through mortgage-backed securities eligible to be sold in the TBA market as economic hedges against mortgage-backed securities that it owns or has sold but not yet purchased. TBAs provide for the forward or delayed delivery of the underlying instrument with settlement up to 180 days. The contractual or notional amounts related to these financial instruments reflect the volume of activity and do not reflect the amounts at risk. Net unrealized gains and losses on TBAs are recorded on the consolidated balance sheet in receivable from brokers, dealers and clearing organizations or payable to brokers, dealers and clearing organizations and in the consolidated income statement as principal transactions revenue, net.

The notional amounts and fair values of the Company's derivatives as of December 31, 2023 and 2022 by product were as follows:


(Expressed in thousands)
	Fair Value of Derivative Instruments as of December 31, 2023
	Description	Notional		Fair Value
Assets:
Derivatives not designated as hedging instruments (1)
Other contracts	TBAs	$	3,700	$	11

Commodity contracts	Futures	5,000		2
		$	8,700	$	13

Liabilities:
Derivatives not designated as hedging instruments (1)
Commodity contracts	Futures	$	6,875,000	$	735
Other contracts	TBAs	3,700		2


		$	6,878,700	$	737

(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.


(Expressed in thousands)
	Fair Value of Derivative Instruments as of December 31, 2022
	Description	Notional		Fair Value
Assets:
Derivatives not designated as hedging instruments (1)
Other contracts	TBAs	$	1,775	$	1,762
	Forward reverse repurchase agreements	15,000		—
	Other	275		—
		$	17,050	$	1,762

Liabilities:
Derivatives not designated as hedging instruments (1)
Commodity contracts	Futures	$	1,912,500	$	44

Other contracts	TBAs	1,775		1,761



		$	1,914,275	$	1,805

(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 location and fair value amounts of the Company's derivative instruments and their effect in the consolidated income statements for the years ended December 31, 2023 and 2022:

(Expressed in thousands)

The Effect of Derivative Instruments in the Consolidated Income Statement

For the Year Ended December 31, 2023

Types

Description

Location

Net Gain

Commodity contracts

Futures

Principal transactions revenue

2,842

Other contracts

Foreign exchange forward contracts

Other revenue

TBAs

Principal transactions revenue

2,933

(Expressed in thousands)

The Effect of Derivative Instruments in the Consolidated Income Statement

For the Year Ended December 31, 2022

Types

Description

Location

Net Gain (Loss)

Commodity contracts

Futures

Principal transactions revenue

4,652

Other contracts

Foreign exchange forward contracts

Other revenue

(28)

TBAs

Principal transactions revenue

4,684

- Definition

The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

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