Derivatives

12 Months Ended

Dec. 31, 2019

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Derivatives

Derivatives

Newmark accounts for its derivatives at fair value, and recognized all derivatives as either assets or liabilities on the accompanying consolidated balance sheets. In its normal course of business, Newmark enters into commitments to extend credit for mortgage loans at a specific rate (rate lock commitments) and commitments to deliver these loans to third-party investors at a fixed price (forward sale contracts). In addition, Newmark entered into the Nasdaq Forwards (See Note 1 — “Organization and Basis of Presentation”) that are accounted for as derivatives.

The fair value of derivative contracts, computed in accordance with Newmark’s netting policy, is set forth below (in thousands):

	As of December 31, 2019							As of December 31, 2018
Derivative contract	Assets		Liabilities		Notional Amounts			Assets		Liabilities		Notional Amounts(1)
Forward sale contracts	$	14,389	$	13,537	$	1,606,943	(1)	$	8,177	$	9,208	$	1,213,154	(1)
Nasdaq Forwards	26,502		—		267,480			77,619		—		360,960
Rate lock commitments	32,035		12,124		1,396,827			6,732		7,470		240,720
Total	$	72,926	$	25,661	$	3,271,250		$	92,528	$	16,678	$	1,814,834

⁽¹⁾  Notional amounts represent the sum of gross long and short derivative contracts, an indication of the volume of Newmark’s derivative activity, and does not represent anticipated losses.

The change in fair value of rate lock commitments and forward sale contracts related to mortgage loans are reported as part of “Gains from mortgage banking activities/originations, net” on the accompanying consolidated statements of operations. The change in fair value of rate lock commitments are disclosed net of $2.0 million, $1.7 million and $1.4 million of expenses for the years ended December 31, 2019, 2018 and 2017, respectively. The change in fair value of rate lock commitments related to commissions are included as part of “Compensation and employee benefits” on the accompanying consolidated statements of operations.

Gains and losses on derivative contracts which are included on the consolidated statements of operations were as follows (in thousands):

	Location of gain (loss) recognized in income for derivatives	For the Year Ended December 31,
		2019			2018			2017
Derivatives not designed as hedging instruments:
Nasdaq Forwards	Other income (loss), net	$	(51,117	)	$	19,002		$	—
Rate lock commitments	Gains from mortgage banking activities/originations, net	21,916			935			1,953
Rate lock commitments	Compensation and employee benefits	(2,004		)	(1,673		)	(1,420		)
Forward sale contracts	Gains from mortgage banking activities/originations, net	851			(1,031		)	3,096
Total		$	(30,354	)	$	17,233		$	3,629

Derivative assets and derivative liabilities are included in “Other current assets”, “Other assets” and the “Accounts payable, accrued expenses and other liabilities,” on the accompanying consolidated balance sheets.