Fair value measurements

6 Months Ended

Jun. 30, 2024

Fair Value Disclosures [Abstract]

Fair value measurements

Fair value measurements

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 is 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.

Loans

The fair value of loans is estimated using recently executed transactions and current price quotations, which are usually observable. In rare occurrences when observable pricing information is not available, fair value is generally determined based on cash flow models using discounted cash flow models, competitor comparable data and other valuation metrics.

Auction Rate Securities ("ARS")

As of June 30, 2024, 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 price 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 June 30, 2024, 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 condensed 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 June 30, 2024:

(Expressed in thousands)
	Fair Value		Unfunded Commitments		Redemption Frequency	Redemption Notice Period
Hedge funds (1)	$	341	$	—	Quarterly - Annually	30 - 120 Days
Private equity funds (2)	4,686		1,324		N/A	N/A
	$	5,027	$	1,324

(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, 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 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 June 30, 2024, the fair value of the investment was $7.2 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 June 30, 2024 and December 31, 2023, 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, 2024:

(Expressed in thousands)
	Fair Value Measurements as of June 30, 2024
	Level 1		Level 2		Level 3		Total
Assets
Deposits with clearing organizations	$	34,967	$	—	$	—	$	34,967
Securities owned:
U.S. Treasury securities	859,623		—		—		859,623
U.S. Agency securities	—		5,755		—		5,755
Sovereign obligations	—		424		—		424
Corporate debt and other obligations	—		18,104		—		18,104
Mortgage and other asset-backed securities	—		7,117		—		7,117
Municipal obligations	—		88,373		—		88,373
Convertible bonds	—		25,272		—		25,272
Corporate equities	29,622		—		—		29,622
Money markets	5,750		503		—		6,253
Auction rate securities	—		—		2,713		2,713
Securities owned, at fair value	894,995		145,548		2,713		1,043,256
Investments (1)	1,369		17,287		—		18,656
Loans(1)	—		689		—		689
Derivative contracts:
TBAs	—		29		—		29
Derivative contracts, total	—		29		—		29
Total	$	931,331	$	163,553	$	2,713	$	1,097,597
Liabilities
Securities sold but not yet purchased:
U.S. Treasury securities	$	138,059	$	—	$	—	$	138,059
U.S. Agency securities	—		2		—		2
Corporate debt and other obligations	—		7,279		—		7,279
Convertible bonds	—		13,450		—		13,450
Corporate equities	18,461		—		—		18,461
Securities sold but not yet purchased, at fair value	156,520		20,731		—		177,251
Derivative contracts:
Futures	1,423		—		—		1,423
TBAs	—		33		—		33
Derivative contracts, total	1,423		33		—		1,456
Total	$	157,943	$	20,764	$	—	$	178,707

(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, 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
Securities sold but not yet purchased:
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.    

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, 2024 and 2023:

(Expressed in thousands)
	Level 3 Assets and Liabilities
	For the Three Months Ended June 30, 2024
			Total Realized
	Beginning		and Unrealized		Purchases		Sales and		Transfers		Ending
	Balance		Gain		and Issuances		Settlements		In (Out)		Balance
Assets
Auction rate securities (1)	$	2,713	$	—	$	—	$	—	$	—	$	2,713

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

(Expressed in thousands)
	Level 3 Assets and Liabilities
	For the Three Months Ended June 30, 2023
			Total Realized
	Beginning		and Unrealized		Purchases		Sales and		Transfers		Ending
	Balance		Losses		and Issuances		Settlements		In (Out)		Balance
Assets
Auction rate securities (1)	$	31,776	$	6	$	—	$	(100)	$	—	$	31,682

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

(Expressed in thousands)
	Level 3 Assets and Liabilities
	For the Six Months Ended June 30, 2024
			Total Realized
	Beginning		and Unrealized		Purchases		Sales and		Transfers		Ending
	Balance		Losses		and Issuances		Settlements		In (Out)		Balance
Assets
Auction rate securities (1)	$	2,713	$	—	$	—	$	—	$	—	$	2,713

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

(Expressed in thousands)
	Level 3 Assets and Liabilities
	For the Six Months Ended June 30, 2023
			Total Realized
	Beginning		and Unrealized		Purchases		Sales and		Transfers		Ending
	Balance		Losses		and Issuances		Settlements		In (Out)		Balance
Assets
Auction rate securities (1)	$	31,776	$	6	$	—	$	(100)	$	—	$	31,682

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

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 June 30, 2024:

(Expressed in thousands)			Fair Value Measurement: Assets
	Carrying Value		Level 1		Level 2		Level 3		Total
Cash and cash equivalents	$	33,214	$	33,214	$	—	$	—	$	33,214
Deposits with clearing organizations	73,448		73,448		—		—		73,448
Receivable from brokers, dealers and clearing organizations:
Securities borrowed	134,454		—		134,454		—		134,454
Receivables from brokers	57,699		—		57,699		—		57,699
Securities failed to deliver	20,054		—		20,054		—		20,054
Clearing organizations and other	84,828		—		84,828		—		84,828
	297,035		—		297,035		—		297,035
Receivable from customers	1,161,685		—		1,161,685		—		1,161,685
Notes receivable, net	63,342		—		63,342		—		63,342
Securities purchased under agreements to resell	4,079		—		4,079		—		4,079
Corporate-owned life	94,646		—		94,646		—		94,646
Investments(1)	1,647		—		1,647		—		1,647

(1) 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	$	21,762	$	21,762	$	—	$	—	$	21,762
Bank call loans	218,800		—		218,800		—		218,800
Payables to brokers, dealers and clearing organizations:
Securities loaned	247,219		—		247,219		—		247,219
Payable to brokers	1,557		—		1,557		—		1,557
Securities failed to receive	22,961		—		22,961		—		22,961
Clearing organization and other	5,066		—		5,066		—		5,066
	276,803		—		276,803		—		276,803
Payables to customers	325,886		—		325,886		—		325,886
Securities sold under agreements to repurchase	822,785		—		822,785		—		822,785
Senior secured notes	113,050		—		111,637		—		111,637

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	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
Corporate-owned life	88,989		—		88,989		—		88,989
Investments (1)	2,010		—		2,010		—		2,010

(1) 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
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

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 June 30, 2024 and December 31, 2023 by product were as follows:

(Expressed in thousands)
	Fair Value of Derivative Instruments as of June 30, 2024
	Description	Notional		Fair Value
Assets:
Derivatives not designated as hedging instruments (1)
Other contracts	TBAs	$	10,215	$	29
		$	10,215	$	29
Liabilities:
Derivatives not designated as hedging instruments (1)
Commodity contracts	Futures	$	9,890,000	$	1,423
Other contracts	TBAs	10,215		33
		$	9,900,215	$	1,456

(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, 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.

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 three and six months ended June 30, 2024 and 2023:

(Expressed in thousands)
	The Effect of Derivative Instruments in the Income Statement
	For the Three Months Ended June 30, 2024
		Recognized in Income on Derivatives (pre-tax)
Types	Description	Location	Net Gain
Commodity contracts	Futures	Principal transactions revenue, net	$	1,184
Other contracts	Foreign exchange forward contracts	Other revenue/(Compensation and related expenses)	(24)
Other contracts	TBAs	Principal transactions revenue, net	2
			$	1,162
(Expressed in thousands)
	The Effect of Derivative Instruments in the Income Statement
	For the Three Months Ended June 30, 2023
		Recognized in Income on Derivatives (pre-tax)
Types	Description	Location	Net Gain
Commodity contracts	Futures	Principal transactions revenue, net	$	3,529
Other contracts	Foreign exchange forward contracts	Other revenue/(Compensation and related expenses)	(7)
Other contracts	TBAs	Principal transactions revenue, net	36
			$	3,558

(Expressed in thousands)
	The Effect of Derivative Instruments in the Income Statement
	For the Six Months Ended June 30, 2024
		Recognized in Income on Derivatives (pre-tax)
Types	Description	Location	Net Gain
Commodity contracts	Futures	Principal transactions revenue, net	$	4,436
Other contracts	Foreign exchange forward contracts	Other revenue/(Compensation and related expenses)	$	(24)
Other contracts	TBAs	Principal transactions revenue, net	3
			$	4,415
(Expressed in thousands)
	The Effect of Derivative Instruments in the Income Statement
	For the Six Months Ended June 30, 2023
		Recognized in Income on Derivatives (pre-tax)
Types	Description	Location	Net Gain
Commodity contracts	Futures	Principal transactions revenue, net	$	3,739
Other contracts	Foreign exchange forward contracts	Other revenue/(Compensation and related expenses)	$	(8)
Other contracts	TBAs	Principal transactions revenue, net	$	38
			$	3,769