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Collateralized Securities Transactions
9 Months Ended
Sep. 30, 2013
Collateralized Securities Transactions Disclosure [Abstract]  
Collateralized Securities Transactions
Collateralized Securities Transactions

The Company’s financing and customer securities activities involve the Company using securities as collateral. In the event that the counterparty does not meet its contractual obligation to return securities used as collateral (e.g., pursuant to the terms of a repurchase agreement), or customers do not deposit additional securities or cash for margin when required, the Company may be exposed to the risk of reacquiring the securities or selling the securities at unfavorable market prices in order to satisfy its obligations to its customers or counterparties. The Company seeks to control this risk by monitoring the market value of securities pledged or used as collateral on a daily basis and requiring adjustments in the event of excess market exposure. The Company also uses unaffiliated third party custodians to administer the underlying collateral for certain of its repurchase agreements and short-term financing to mitigate risk.

A reverse repurchase agreement is a transaction in which the Company purchases financial instruments from a seller, typically in exchange for cash, and simultaneously enters into an agreement to resell the same or substantially the same financial instruments to the seller at a stated price plus accrued interest at a future date. A repurchase agreement is a transaction in which the Company sells financial instruments to a buyer, typically in exchange for cash, and simultaneously enters into an agreement to repurchase the same or substantially the same financial instruments from the buyer at a stated price plus accrued interest at a future date. Even though repurchase and reverse repurchase agreements involve the legal transfer of ownership of financial instruments, they are accounted for as financing arrangements because they require the financial instruments to be repurchased or resold at maturity of the agreement.

In a securities borrowed transaction, the Company borrows securities from a counterparty in exchange for cash. When the Company returns the securities, the counterparty returns the cash. Interest is generally paid periodically over the life of the transaction.

In the normal course of business, the Company obtains securities purchased under agreements to resell, securities borrowed and margin agreements on terms that permit it to repledge or resell the securities to others, typically pursuant to repurchase agreements. The Company obtained securities with a fair value of approximately $268.0 million and $186.1 million at September 30, 2013 and December 31, 2012, respectively, of which $258.0 million and $174.4 million, respectively, had been pledged or otherwise transferred to satisfy its commitments under financial instruments and other inventory positions sold, but not yet purchased.

The following is a summary of the Company’s securities sold under agreements to repurchase ("Repurchase Liabilities"), the fair market value of related collateral pledged and the interest rate charged by the Company’s counterparty, which is based on LIBOR plus an applicable margin, as of September 30, 2013:
 
Repurchase
 
Fair Market
 
 
(Dollars in thousands)
Liabilities
 
Value
 
Interest Rate
Term up to 30 day maturities:
 
 
 
 
 
Asset-backed securities
$
4,062

 
$
5,625

 
1.68%
On demand maturities:
 
 
 
 
 
U.S. government agency securities
74,852

 
78,383

 
0.3 - 0.55%
 
$
78,914

 
$
84,008

 
 


Reverse repurchase agreements, repurchase agreements and securities borrowed and loaned are reported on a net basis by counterparty when a legal right of offset exists. The following table provides information about the offsetting of these instruments and related collateral amounts at September 30, 2013:
 
 
 
 
Gross Amount
 
Net Amounts
 
Gross Amounts Not Offset
 
 
 
 
 
 
Offset on the
 
Presented on the
 
on the Consolidated Statements
 
 
 
 
Gross
 
Consolidated
 
Consolidated
 
of Financial Condition
 
 
(Dollars in thousands)
 
Recognized
 
 Statements of
 
 Statements of
 
Financial
 
Collateral
 
Net
Description
 
Assets
 
Financial Condition
 
Financial Condition
 
 Instruments
 
Received (1)
 
Amount
Reverse repurchase agreements
 
$
227,423

 
$
(41,999
)
 
$
185,424

 
$

 
$
(185,424
)
 
$

Securities borrowed (3)
 
36,395

 

 
36,395

 

 
(36,395
)
 

 
 
 
 
Gross Amount
 
Net Amount
 
Gross Amount Not Offset
 
 
 
 
 
 
Offset on the
 
Presented on the
 
on the Consolidated Statements
 
 
 
 
Gross
 
Consolidated
 
Consolidated
 
of Financial Condition
 
 
(Dollars in thousands)
 
Recognized
 
 Statements of
 
 Statements of
 
Financial
 
Collateral
 
Net
Description
 
Liabilities
 
Financial Condition
 
Financial Condition
 
 Instruments
 
Pledged (2)
 
Amount
Repurchase agreements
 
$
78,914

 
$
(41,999
)
 
$
36,915

 
$

 
$
(36,915
)
 
$

(1)
Includes securities received by the Company from the counterparty. These securities are not included on the consolidated statements of financial condition unless there is an event of default.
(2)
Includes the fair value of securities pledged by the Company to the counterparty. These securities are included on the consolidated statements of financial condition unless the Company defaults.
(3)
Deposits paid for securities borrowed are included in receivables from brokers, dealers and clearing organizations on the consolidated statements of financial condition. See Note 9 for additional information on receivables from brokers, dealers and clearing organizations.

There were no gross amounts offset on the consolidated statements of financial condition for reverse repurchase agreements, securities borrowed or repurchase agreements at December 31, 2012 as a legal right of offset did not exist. The Company had no outstanding securities lending arrangements as of September 30, 2013 or December 31, 2012. See Note 6 for information related to the Company's offsetting of derivative contracts.