Fair value measurements (Tables)

12 Months Ended

Dec. 31, 2016

Securities Owned and Securities Sold, But Not Yet Purchased at Fair Value

Securities Owned and Securities Sold But Not Yet Purchased at Fair Value



(Expressed in thousands)
	As of December 31,
	2016				2015
	Owned ⁽¹⁾		Sold		Owned ⁽¹⁾		Sold
U.S. treasury, agency and sovereign obligations	$	459,051	$	28,674	$	509,614	$	77,485
Corporate debt and other obligations	17,074		2,536		16,138		1,652
Mortgage and other asset-backed securities	5,024		31		3,504		27
Municipal obligations	56,750		516		30,132		—
Convertible bonds	56,480		11,604		54,693		5,951
Corporate equities	31,174		41,689		34,475		41,378
Money markets	189		—		35		—
Auction rate securities	84,926		—		86,802		—
Total	$	710,668	$	85,050	$	735,393	$	126,493

Quantitative Information about Level 3 Fair Value Measurements

Additional information regarding the valuation technique and inputs for ARS used is as follows:



(Expressed in thousands)
Quantitative Information about Level 3 Fair Value Measurements as of December 31, 2016
Product	Principal		Valuation Adjustment			Fair Value		Valuation Technique	Unobservable Input	Range	Weighted Average
Auction Rate Securities Owned ⁽¹⁾
Auction Rate Preferred Securities	$	87,800	$	3,171		$	84,629	Discounted Cash Flow	Discount Rate ⁽²⁾	1.86% to 2.53%	2.18%
									Duration	4.0 Years	4.0 Years
									Current Yield ⁽³⁾	1.18% to 1.27%	1.23%
Municipal Auction Rate Securities	25		1			24		Discounted Cash Flow	Discount Rate ⁽⁴⁾	3.16%	3.16%
									Duration	4.5 Years	4.5 Years
									Current Yield ⁽³⁾	2.05%	2.05%
Student Loan Auction Rate Securities	300		27			273		Discounted Cash Flow	Discount Rate ⁽⁵⁾	3.45%	3.45%
									Duration	7.0 Years	7.0 Years
									Current Yield ⁽³⁾	1.98%	1.98%
	$	88,125	$	3,199		$	84,926
Auction Rate Securities Commitments to Purchase ⁽⁶⁾
Auction Rate Preferred Securities	$	6,654	$	(849	)	$	7,503	Discounted Cash Flow	Discount Rate ⁽²⁾	1.86% to 2.53%	2.18%
									Duration	4.0 Years	4.0 Years
									Current Yield ⁽³⁾	1.18% to 1.27%	1.23%
Auction Rate Preferred Securities	24,329		643			23,686		Discounted Cash Flow	Discount Rate ⁽²⁾	1.86% to 2.53%	2.18%
									Duration	4.0 Years	4.0 Years
									Current Yield ⁽³⁾	1.18% to 1.27%	1.23%
Municipal Auction Rate Securities	2		—			2		Discounted Cash Flow	Discount Rate ⁽⁴⁾	3.16%	3.16%
									Duration	4.5 Years	4.5 Years
									Current Yield ⁽³⁾	2.05%	2.05%
Student Loan Auction Rate Securities	27		2			25		Discounted Cash Flow	Discount Rate ⁽⁵⁾	3.45%	3.45%
									Duration	7.0 Years	7.0 Years
									Current Yield ⁽³⁾	1.98%	1.98%
	$	31,012	$	(204	)	$	31,216
Total	$	119,137	$	2,995		$	116,142


(1)	Principal amount represents the par value of the ARS and is included in securities owned on the consolidated balance sheet as of December 31, 2016. The valuation adjustment amount is included as a reduction to securities owned on the consolidated balance sheet as of December 31, 2016.


(2)	Derived by applying a multiple to the spread between 110% to 150% to the U.S. Treasury rate of 1.69%.


(3)	Based on current yields for ARS positions owned.


(4)	Derived by applying a multiple to the spread of 175% to the U.S. Treasury rate of 1.81%.


(5)	Derived by applying the sum of the spread of 1.20% to the U.S. Treasury rate of 2.25%.

(6)

Principal amount represents the present value of the ARS par value that the Company is committed to purchase at a future date. This principal amount is presented as an off-balance sheet item. The valuation adjustment amounts, unrealized gains and losses, are included in other assets and accounts payable and other liabilities, respectively, on the consolidated balance sheet as of December 31, 2016.

Investments in Company-Sponsored Funds

The following table provides information about the Company's investments in Company-sponsored funds as of December 31, 2016:



(Expressed in thousands)
	Fair Value		Unfunded Commitments		Redemption Frequency	Redemption Notice Period
Hedge funds ⁽¹⁾	$	2,423	$	—	Quarterly - Annually	30 - 120 Days
Private equity funds ⁽²⁾	4,425		1,251		N/A	N/A
	$	6,848	$	1,251


(1)	Includes investments in hedge funds and hedge fund of funds that pursue long/short, event-driven, and activist strategies. Each hedge fund has various restrictions regarding redemption; no investment is locked-up for a period greater than one year.


(2)	Includes private equity funds and private equity fund of funds with a focus on diversified portfolios, real estate and global natural resources. Due to the illiquid nature of these funds, investors are not permitted to make withdrawals without the consent of the general partner. The lock-up period of the private equity funds can extend to 10 years.

Assets and Liabilities Measured at Fair Value on Recurring Basis

The Company's assets and liabilities, recorded at fair value on a recurring basis as of December 31, 2016 and 2015, 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, 2016



(Expressed in thousands)
	Fair Value Measurements as of December 31, 2016
	Level 1		Level 2		Level 3		Total
Assets
Cash equivalents	$	16,242	$	—	$	—	$	16,242
Deposits with clearing organizations	26,437		—		—		26,437
Securities owned:
U.S. Treasury securities ⁽¹⁾	418,888		—		—		418,888
U.S. Agency securities	5,878		32,391		—		38,269
Sovereign obligations	—		1,894		—		1,894
Corporate debt and other obligations	—		17,074		—		17,074
Mortgage and other asset-backed securities	—		5,024		—		5,024
Municipal obligations	—		56,706		44		56,750
Convertible bonds	—		56,480		—		56,480
Corporate equities	31,174		—		—		31,174
Money markets	189		—		—		189
Auction rate securities	—		—		84,926		84,926
Securities owned, at fair value	456,129		169,569		84,970		710,668
Investments ⁽²⁾	—		—		158		158
Securities purchased under agreements to resell⁽³⁾	—		24,006		—		24,006
Derivative contracts:
TBAs	—		814		—		814
ARS purchase commitments	—		—		849		849
Derivative contracts, total	—		814		849		1,663
Total	$	498,808	$	194,389	$	85,977	$	779,174
Liabilities
Securities sold but not yet purchased:
U.S. Treasury securities	$	28,662	$	—	$	—	$	28,662
U.S. Agency securities	—		12		—		12
Corporate debt and other obligations	—		2,536		—		2,536
Mortgage and other asset-backed securities	—		31		—		31
Municipal obligations	—		516		—		516
Convertible bonds	—		11,604		—		11,604
Corporate equities	41,689		—		—		41,689
Securities sold but not yet purchased, at fair value	70,351		14,699		—		85,050
Derivative contracts:
Futures	166		—		—		166
Foreign exchange forward contracts	1		—		—		1
TBAs	—		1,212		—		1,212
ARS purchase commitments	—		—		645		645
Derivative contracts, total	167		1,212		645		2,024
Total	$	70,518	$	15,911	$	645	$	87,074


(1)	$3.6 million is included in assets held for sale on the consolidated balance sheet. See Note 3 for details.

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


(3)	Included in securities purchased under agreements to resell where the Company has elected fair value option treatment.

Assets and liabilities measured at fair value on a recurring basis as of December 31, 2015



(Expressed in thousands)
	Fair Value Measurements as of December 31, 2015
	Level 1		Level 2		Level 3		Total
Assets
Cash equivalents	$	13,000	$	—	$	—	$	13,000
Deposits with clearing organizations	31,456		—		—		31,456
Securities owned:
U.S. Treasury securities ⁽¹⁾	436,533		—		—		436,533
U.S. Agency securities	25,240		46,176		—		71,416
Sovereign obligations	—		1,665		—		1,665
Corporate debt and other obligations	—		16,138		—		16,138
Mortgage and other asset-backed securities	—		3,504		—		3,504
Municipal obligations	—		30,051		81		30,132
Convertible bonds	—		54,693		—		54,693
Corporate equities	34,475		—		—		34,475
Money markets	35		—		—		35
Auction rate securities	—		—		86,802		86,802
Securities owned, at fair value	496,283		152,227		86,883		735,393
Investments ⁽²⁾	—		—		157		157
Loans held for sale ⁽³⁾	—		60,234		—		60,234
Securities purchased under agreements to resell ⁽⁴⁾	—		206,499		—		206,499
Derivative contracts:
TBAs	—		6,448		—		6,448
Interest rate lock commitments	—		—		9,161		9,161
Derivative contracts, total	—		6,448		9,161		15,609
Total	$	540,739	$	425,408	$	96,201	$	1,062,348
Liabilities
Securities sold but not yet purchased:
U.S. Treasury securities	$	75,653	$	—	$	—	$	75,653
U.S. Agency securities	—		15		—		15
Sovereign Obligations	—		1,817		—		1,817
Corporate debt and other obligations	—		1,652		—		1,652
Mortgage and other asset-backed securities	—		27		—		27
Convertible bonds	—		5,951		—		5,951
Corporate equities	41,378		—		—		41,378
Securities sold but not yet purchased, at fair value	117,031		9,462		—		126,493
Derivative contracts:
Futures	249		—		—		249
Foreign exchange forward contracts	2		—		—		2
TBAs	—		11,619		—		11,619
Interest rate lock commitments	—		—		923		923
ARS purchase commitments	—		—		1,369		1,369
Derivative contracts, total	251		11,619		2,292		14,162
Total	$	117,282	$	21,081	$	2,292	$	140,655


(1)	$562,000 is included in assets held for sale on the consolidated balance sheet. See Note 3 for details.

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

(3)Included in assets held for sale on the consolidated balance sheet. See Note 3 for details.


(4)	Included in securities purchased under agreements to resell where the Company has elected fair value option treatmen

Changes in Level 3 Assets and Liabilities Measured at Fair Value on Recurring Basis

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, 2016 and 2015:



(Expressed in thousands)
	Level 3 Assets and Liabilities
	For the Year Ended December 31, 2016
	Beginning Balance		Total Realized and Unrealized Gains (Losses) ⁽⁴⁾⁽⁵⁾		Purchases and Issuances		Sales and Settlements			Transfers In (Out)		Ending Balance


Assets
Municipal obligations	$	81	$	25	$	—	$	(62	)	$	—	$	44
Auction rate securities ^(1)(6)(7)	86,802		1,974		13,775		(17,625		)	—		84,926
Interest rate lock commitments ⁽²⁾	9,161		4,345		—		(13,506		)	—		—
Investments	157		1		—		—			—		158
ARS purchase commitments ⁽³⁾	—		849		—		—			—		849
Liabilities
Interest rate lock commitments ⁽²⁾	923		923		—		—			—		—
ARS purchase commitments ⁽³⁾	1,369		724		—		—			—		645


(1)	Represents auction rate preferred securities, municipal auction rate securities and student loan auction rate securities that failed in the auction rate market.

(2)

Interest rate lock commitment assets and liabilities are recorded upon the commitment to originate a loan with a borrower and sell the loan to an investor. The commitment assets and liabilities are recognized at fair value, which reflects the fair value of the contractual loan origination-related fees and sale premiums, net of co-broker fees, and the estimated fair value of the expected net future cash flows associated with the servicing of the loan.


(3)	Represents the difference in principal and fair value for auction rate securities purchase commitments outstanding at the end of the period.


(4)	Included in principal transactions in the consolidated statement of operations, except for investments which are included in other income in the consolidated statement of operations.


(5)	Unrealized gains are attributable to assets or liabilities that are still held at the reporting date.

(6)

Purchases and issuances in connection with ARS purchase commitments represent instances in which the Company purchased ARS securities from clients during the period pursuant to regulatory and legal settlements and awards that satisfy the outstanding commitment to purchase obligation. This also includes instances where the ARS issuer has redeemed ARS where the Company had an outstanding purchase commitment prior to the Company purchasing those ARS.


(7)	Sales and settlements for the ARS purchase commitments represent additional purchase commitments made during the period for regulatory and legal ARS settlements and awards.



(Expressed in thousands)
	Level 3 Assets and Liabilities
	For the Year Ended December 31, 2015
	Beginning Balance		Total Realized and Unrealized Gains (Losses) ⁽⁴⁾⁽⁵⁾			Purchases and Issuances		Sales and Settlements			Transfers In (Out)		Ending Balance


Assets
Municipal obligations	$	164	$	(63	)	$	—	$	(20	)	$	—	$	81
Auction rate securities ^(1)(6)(7)	91,422		1,955			17,950		(24,525		)	—		86,802
Interest rate lock commitments ⁽²⁾	7,576		1,585			—		—			—		9,161
Investments	193		(36		)	—		—			—		157
Liabilities
Interest rate lock commitments ⁽²⁾	1,222		299			—		—			—		923
ARS purchase commitments ⁽³⁾	902		(467		)	—		—			—		1,369


(1)	Represents auction rate preferred securities, municipal auction rate securities and student loan auction rate securities that failed in the auction rate market.

(2)


(3)	Represents the difference in principal and fair value for auction rate securities purchase commitments outstanding at the end of the period.


(4)	Included in principal transactions in the consolidated statement of operations, except for investments which are included in other income in the consolidated statement of operations.


(5)	Unrealized gains (losses) are attributable to assets or liabilities that are still held at the reporting date.

(6)


(7)	Sales and settlements for the ARS purchase commitments represent additional purchase commitments made during the period for regulatory and legal ARS settlements and award

Assets and Liabilities Not Measured at Fair Value on Recurring Basis

Assets and liabilities not measured at fair value as of December 31, 2016



(Expressed in thousands)					Fair Value Measurement: Assets
	As of December 31, 2016				As of December 31, 2016
	Carrying Value		Fair Value		Level 1		Level 2		Level 3		Total
Cash	$	48,671	$	48,671	$	48,671	$	—	$	—	$	48,671
Deposits with clearing organization	11,748		11,748		11,748		—		—		11,748
Receivable from brokers, dealers and clearing organizations:
Securities borrowed	154,090		154,090		—		154,090		—		154,090
Receivables from brokers	25,768		25,768		—		25,768		—		25,768
Securities failed to deliver	6,172		6,172		—		6,172		—		6,172
Clearing organizations	26,081		26,081		—		26,081		—		26,081
Other	2,823		2,823		—		2,823		—		2,823
	214,934		214,934		—		214,934		—		214,934
Receivable from customers	847,386		847,386		—		847,386		—		847,386
Investments ⁽¹⁾	56,300		56,300		—		56,300		—		56,300


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



(Expressed in thousands)					Fair Value Measurement: Liabilities
	As of December 31, 2016				As of December 31, 2016
	Carrying Value		Fair Value		Level 1		Level 2		Level 3		Total
Drafts payable	$	39,228	$	39,228	$	39,228	$	—	$	—	$	39,228
Bank call loans	145,800		145,800		—		145,800		—		145,800
Payables to brokers, dealers and clearing organizations:
Securities loaned	179,875		179,875		—		179,875		—		179,875
Payable to brokers	610		610		—		610		—		610
Securities failed to receive	11,523		11,523		—		11,523		—		11,523
Other	29,381		29,381		—		29,381		—		29,381
	221,389		221,389		—		221,389		—		221,389
Payables to customers	449,946		449,946		—		449,946		—		449,946
Securities sold under agreements to repurchase	378,084		378,084		—		378,084		—		378,084
Senior secured notes	150,000		151,782		—		151,782		—		151,782

Assets and liabilities not measured at fair value as of December 31, 2015



(Expressed in thousands)					Fair Value Measurement: Assets
	As of December 31, 2015				As of December 31, 2015
	Carrying Value		Fair Value		Level 1		Level 2		Level 3		Total
Cash	$	50,364	$	50,364	$	50,364	$	—	$	—	$	50,364
Deposits with clearing organization	18,034		18,034		18,034		—		—		18,034
Receivable from brokers, dealers and clearing organizations:
Securities borrowed	224,672		224,672		—		224,672		—		224,672
Receivables from brokers	49,458		49,458		—		49,458		—		49,458
Securities failed to deliver	7,799		7,799		—		7,799		—		7,799
Clearing organizations	25,030		25,030		—		25,030		—		25,030
Other	58,832		58,832		—		58,832		—		58,832
	365,791		365,791		—		365,791		—		365,791
Receivable from customers	840,355		840,355		—		840,355		—		840,355
Mortgage servicing rights ⁽¹⁾	28,168		41,838		—		—		41,838		41,838
Investments ⁽²⁾	53,286		53,286		—		53,286		—		53,286


(1)	Included in assets held for sale on the consolidated balance sheet. See Note 3 for details.


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



(Expressed in thousands)					Fair Value Measurement: Liabilities
	As of December 31, 2015				As of December 31, 2015
	Carrying Value		Fair Value		Level 1		Level 2		Level 3		Total
Drafts payable	$	48,011	$	48,011	$	48,011	$	—	$	—	$	48,011
Bank call loans	100,200		100,200		—		100,200		—		100,200
Payables to brokers, dealers and clearing organizations:
Securities loaned	130,658		130,658		—		130,658		—		130,658
Payable to brokers	3,316		3,316		—		3,316		—		3,316
Securities failed to receive	21,513		21,513		—		21,513		—		21,513
Other	9,059		9,059		—		9,059		—		9,059
	164,546		164,546		—		164,546		—		164,546
Payables to customers	594,833		594,833		—		594,833		—		594,833
Securities sold under agreements to repurchase	651,445		651,445		—		651,445		—		651,445
Warehouse payable ⁽¹⁾	54,341		54,341		—		54,341		—		54,341
Senior secured notes	150,000		154,568		—		154,568		—		154,568


(1)	Included in liabilities held for sale on the consolidated balance sheet. See Note 3 for details.

Notional Amounts and Fair Values of Derivatives by Product

The notional amounts and fair values of the Company's derivatives as of December 31, 2016 and 2015 by product were as follows:



(Expressed in thousands)
	Fair Value of Derivative Instruments as of December 31, 2016
	Description	Notional		Fair Value
Assets:
Derivatives not designated as hedging instruments⁽¹⁾
Other contracts	TBAs	$	169,500	$	332
	TBA sale contracts	121,573		482
	ARS purchase commitments	6,654		849
		$	297,727	$	1,663
Liabilities:
Derivatives not designated as hedging instruments ⁽¹⁾
Commodity contracts	Futures	$	4,059,000	$	166
Other contracts	Foreign exchange forward contracts	200		1
	TBAs	169,500		289
	TBA purchase contracts	121,573		923
	Forward start repurchase agreements	382,000		—
	ARS purchase commitments	24,358		645
		$	4,756,631	$	2,024


(1)	See "Derivative Instruments and Hedging Activities" above for 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, 2015
	Description	Notional		Fair Value
Assets:
Derivatives not designated as hedging instruments ⁽¹⁾
Other contracts	TBAs	$	35,650	$	4
	TBA sale contracts	83,810		6,444
	Interest rate lock commitments	203,648		9,161
		$	323,108	$	15,609
Liabilities:
Derivatives not designated as hedging instruments⁽¹⁾
Commodity contracts	Futures	$	2,943,000	$	249
Other contracts	Foreign exchange forward contracts	400		2
	TBAs	24,350		5
	TBA sale contracts	223,846		11,614
	Interest rate lock commitments	48,638		923
	ARS purchase commitments	27,813		1,369
		$	3,268,047	$	14,162


(1)	See "Derivative Instruments and Hedging Activities" above for description of derivative financial instruments. Such derivative instruments are not subject to master netting agreements, thus the related amounts are not offse

Fair Value Amounts of Derivative Instruments and their Effect on Statement of Operations

The following table presents the location and fair value amounts of the Company's derivative instruments and their effect in the consolidated statements of operations for the years ended December 31, 2016 and 2015: