Fair Value Measurements

12 Months Ended

Dec. 31, 2021

Fair Value Disclosures [Abstract]

Fair Value Measurements

4. Fair Value Measurements

The following table summarizes the valuation of the Company’s assets and liabilities measured at fair value as categorized based on the hierarchy described in Note 2:

	Level 1		Level 2		Level 3		Total
	(In thousands)
As of December 31, 2021
Assets
Money market funds	$	14,206	$	—	$	—	$	14,206
Trading securities
U.S. Treasuries		—		24,883		—		24,883
Mutual funds held in rabbi trust		—		11,195		—		11,195
Total assets	$	14,206	$	36,078	$	—	$	50,284
Liabilities
Contingent consideration payable	$	—	$	—	$	41,090	$	41,090
As of December 31, 2020
Assets
Money market funds	$	20,856	$	—	$	—	$	20,856
Trading securities
Corporate debt		—		19,222		—		19,222
Mutual funds held in rabbi trust		—		8,889		—		8,889
Total assets	$	20,856	$	28,111	$	—	$	48,967
Liabilities
Contingent consideration payable	$	—	$	—	$	15,026	$	15,026
Foreign currency forward position		—		805		—		805
Total liabilities	$	—	$	805	$	15,026	$	15,831

Securities classified within Level 2 were valued using a market approach utilizing prices and other relevant information generated by market transactions involving comparable assets. The foreign currency forward contracts are classified within Level 2 as the valuation inputs are based on quoted market prices. The mutual funds held in a rabbi trust represent investments associated with the Company’s deferred cash incentive plan.

Liabilities classified within Level 3 reflect contingent consideration payable recognized in connection with acquisitions. Significant unobservable inputs used in the valuation of contingent consideration payable include estimates of client retention, electronic order flow and license fees over periods of 18 to 24 months from the acquisition dates. The following table summarizes the change in the Company's Level 3 liabilities for the year ended December 31, 2021:

	December 31, 2020		Additions - acquisitions		Revaluations		Foreign Currency Translation			December 31, 2021
	(In thousands)
Contingent consideration payable	$	15,026	$	22,450	$	4,885	$	(1,271	)	$	41,090

The table below presents the range and average significant unobservable inputs used in the valuation of the Company's Level 3 liabilities:

	Valuation Technique	Unobservable Inputs	Range		Average
	($ in thousands)
As of December 31, 2021
Liabilities:
Contingent consideration payable	Discounted cash flows	Present value factor	0.95 - 1			0.98
		Customer retention rate	84.0%		84.0%
		First earn-out period variable fee	$2,703 - $3,086		$2,895
		Percentage of electronic trading volume	86.0% - 96.6%		91.3%
As of December 31, 2020
Liabilities:
Contingent consideration payable	Discounted cash flows	Present value factor		0.82		0.82
		Customer retention rate	80.0%		80.0%

The table below presents the carrying value, fair value and fair value hierarchy category of the Company’s financial assets and liabilities that are not measured at fair value on the Consolidated Statement of Financial Condition. The carrying values of the Company’s financial assets and liabilities not measured at fair value categorized in the fair value hierarchy as Level 1 and Level 2 approximate fair value due to the short-term nature of the underlying assets and liabilities.

	Carrying Value		Fair Value		Level 1		Level 2		Level 3		Total
	(In thousands)
As of December 31, 2021
Financial assets not measured at fair value:
Cash and cash equivalents	$	506,735	$	506,735	$	506,735	$	—	$	—	$	506,735
Cash segregated under federal regulations		50,159		50,159		50,159		—		—		50,159
Accounts receivable, net of allowance		63,881		63,881		—		63,881		—		63,881
Receivables from broker-dealers, clearing organizations and customers		408,346		408,346		68,565		339,781		—		408,346
Total	$	1,029,121	$	1,029,121	$	625,459	$	403,662	$	—	$	1,029,121
Financial liabilities not measured at fair value:
Payables to broker-dealers, clearing organizations and customers	$	229,325	$	229,325	$	—	$	229,325	$	—	$	229,325
As of December 31, 2020
Financial assets not measured at fair value:
Cash and cash equivalents	$	460,858	$	460,858	$	460,858	$	—	$	—	$	460,858
Cash segregated under federal regulations		50,059		50,059		50,059		—		—		50,059
Accounts receivable, net of allowance		79,577		79,577		—		79,577		—		79,577
Receivables from broker-dealers, clearing organizations and customers		279,915		279,915		97,043		182,872		—		279,915
Total	$	870,409	$	870,409	$	607,960	$	262,449	$	—	$	870,409
Financial liabilities not measured at fair value:
Payables to broker-dealers, clearing organizations and customers	$	133,326	$	133,326	$	—	$	133,326	$	—	$	133,326

The following is a summary of the Company’s investments:

	Amortized cost		Gross unrealized gains		Gross unrealized losses			Fair value
	(In thousands)
As of December 31, 2021
Trading securities
U.S. Treasuries	$	24,994	$	—	$	(111	)	$	24,883
Mutual funds held in rabbi trust		9,941		1,254		—			11,195
Total investments	$	34,935	$	1,254	$	(111	)	$	36,078
As of December 31, 2020
Trading securities
Corporate debt	$	19,081	$	141	$	—		$	19,222
Mutual funds held in rabbi trust		7,680		1,209		—			8,889
Total investments	$	26,761	$	1,350	$	—		$	28,111

The following table summarizes the fair value of the investments based upon the contractual maturities:

	As of December 31,
	2021		2020
	(In thousands)
Less than one year	$	11,195	$	18,290
Due in 1 - 5 years		24,883		9,821
Total	$	36,078	$	28,111

Proceeds from the sales and maturities of investments during the years ended December 31, 2021, 2020 and 2019 were $19.4 million, $261.6 million and $262.1 million, respectively. Net unrealized losses on trading securities were $0.3 million and $0.4 million for the year ended December 31, 2021 and 2020, respectively. Net realized gains were $0.1 million and $1.7 million for the year ended December 31, 2021 and 2020, respectively, and were immaterial for the year ended December 31, 2019.