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Assets and Liabilities, at Fair Value (Notes)
 9 Months Ended
Jun. 30, 2013
Assets and Liabilities, at Fair Value [Abstract]  
Fair Value Disclosures [Text Block]
Assets and Liabilities, at Fair Value
The Company’s financial and nonfinancial assets and liabilities reported at fair value are included within the following captions on the condensed consolidated balance sheets:
•
Cash and cash equivalents
•
Cash, securities and other assets segregated under federal and other regulations
•
Deposits and receivables from exchange-clearing organizations, broker-dealers, clearing organizations and counterparties
•
Financial instruments owned
•
Accounts payable and other accrued liabilities
•
Payables to customers
•
Payables to broker-dealers, clearing organizations and counterparties
•
Financial instruments sold, not yet purchased
Fair Value Hierarchy
The majority of financial assets and liabilities on the condensed consolidated balance sheets are reported at fair value. Cash is reported at the balance held at financial institutions. Cash equivalents include money market funds, which are valued at period-end at the net asset value provided by the fund’s administrator, and certificates of deposit, which are stated at cost plus accrued interest, which approximates fair value. Cash, securities and other assets segregated under federal and other regulations include the value of cash collateral as well as the value of other pledged investments, primarily U.S. Treasury bills and obligations issued by government sponsored entities and commodities warehouse receipts. Deposits with and receivables from exchange-clearing organizations and broker-dealers, clearing organizations and counterparties and payables to customers and broker-dealers, clearing organizations and counterparties include the value of cash collateral as well as the value of money market funds and other pledged investments, primarily U.S. Treasury bills and obligations issued by government sponsored entities and mortgage-backed securities. These balances also include the fair value of exchange-traded futures and options-on-futures and exchange-cleared swaps and options determined by prices on the applicable exchange. Financial instruments owned and sold, not yet purchased include the value of U.S. and foreign government obligations, corporate debt securities, derivative financial instruments, commodities and mutual funds. The fair value of exchange common stock is determined by quoted market prices, and the fair value of exchange memberships is determined by recent sale transactions. Payable to lenders carry variable rates of interest and thus approximate fair value.
The fair value estimates presented in the condensed consolidated financial statements are based on pertinent information available to management as of June 30, 2013 and September 30, 2012. Although management is not aware of any factors that would significantly affect the estimated fair value amounts, such amounts have not been comprehensively revalued for purposes of these condensed consolidated financial statements since that date and current estimates of fair value may differ significantly from the amounts presented in the condensed consolidated financial statements.
Cash equivalents, securities, commodities warehouse receipts, derivative financial instruments, commodities leases, exchange common stock and contingent liabilities are carried at fair value, on a recurring basis, and are classified and disclosed into three levels within the fair value hierarchy. The Company did not have any fair value adjustments for assets or liabilities measured at fair value on a non-recurring basis during the nine months ended June 30, 2013. The three levels of the fair value hierarchy under the Fair Value Measurements and Disclosures Topic of the ASC are:
Level 1 - Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities;
Level 2 - Quoted prices for identical or similar assets or liabilities in markets that are less active, that is, markets in which there are few transactions for the asset or liability that are observable for substantially the full term; and
Level 3 - Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (i.e., supported by little or no market activity).
The following tables set forth the Company’s financial and nonfinancial assets and liabilities accounted for at fair value, on a recurring basis, as of June 30, 2013 and September 30, 2012 by level within the fair value hierarchy.
 
June 30, 2013
(in millions)
Level 1
 
Level 2
 
Level 3
 
Netting and
Collateral
(1)
 
Total
Assets:
 
 
 
 
 
 
 
 
 
Money market funds
$
0.1

 
$
—

 
$
—

 
$
—

 
$
0.1

Certificate of deposits
0.8

 
—

 
—

 
—

 
0.8

Unrestricted cash equivalents
0.9

 
—

 
—

 
—

 
0.9

Commodities warehouse receipts
8.3

 
—

 
—

 
—

 
8.3

U.S. government obligations
—

 
26.4

 
—

 
—

 
26.4

Securities and other assets segregated under federal and other regulations
8.3

 
26.4

 
—

 
—

 
34.7

Money market funds
551.6

 
—

 
—

 
—

 
551.6

U.S. government obligations
—

 
843.7

 
—

 
—

 
843.7

Mortgage-backed securities
—

 
5.7

 
—

 
—

 
5.7

Derivatives
2,415.8

 
—

 
—

 
(2,510.9
)
 
(95.1
)
Deposits and receivables from exchange-clearing organizations
2,967.4

 
849.4

 
—

 
(2,510.9
)
 
1,305.9

Deposits and receivables from broker-dealers, clearing organizations and counterparties - derivatives
1.1

 
—

 
—

 
(0.8
)
 
0.3

Common and preferred stock and American Depositary Receipts ("ADRs")
37.0

 
16.3

 
0.8

 
—

 
54.1

Exchangeable foreign ordinary equities and ADRs
28.3

 
—

 
—

 
—

 
28.3

Corporate and municipal bonds
0.2

 
—

 
3.6

 
—

 
3.8

Foreign government obligations
10.0

 
—

 
—

 
—

 
10.0

Derivatives
284.6

 
469.6

 
—

 
(689.2
)
 
65.0

Commodities leases
—

 
69.3

 
—

 
(65.7
)
 
3.6

Exchange firm common stock
4.6

 
—

 
—

 
—

 
4.6

Mutual funds and other
3.5

 
—

 
—

 
—

 
3.5

Financial instruments owned
368.2

 
555.2

 
4.4

 
(754.9
)
 
172.9

Total assets at fair value
$
3,345.9

 
$
1,431.0

 
$
4.4

 
$
(3,266.6
)
 
$
1,514.7

Liabilities:
 
 
 
 
 
 
 
 
 
Accounts payable and other accrued liabilities - contingent liabilities
$
—

 
$
—

 
$
16.1

 
$
—

 
$
16.1

Payables to exchange-clearing organizations, broker-dealers and counterparties - derivatives
2,434.7

 
—

 
—

 
(2,434.7
)
 
—

Common and preferred stock and ADRs
60.9

 
12.6

 
—

 
—

 
73.5

Exchangeable foreign ordinary equities and ADRs
11.3

 
—

 
—

 
—

 
11.3

Derivatives
332.1

 
448.5

 
—

 
(738.0
)
 
42.6

Commodities leases
—

 
105.1

 
—

 
(49.5
)
 
55.6

Financial instruments sold, not yet purchased
404.3

 
566.2

 
—

 
(787.5
)
 
183.0

Total liabilities at fair value
$
2,839.0

 
$
566.2

 
$
16.1

 
$
(3,222.2
)
 
$
199.1

 
(1)
Represents cash collateral and the impact of netting across the levels of the fair value hierarchy. Netting among positions classified within the same level is included in that level.
 
September 30, 2012
(in millions)
Level 1
 
Level 2
 
Level 3
 
Netting and
Collateral
(1)
 
Total
Assets:
 
 
 
 
 
 
 
 
 
Money market funds
$
0.1

 
$
—

 
$
—

 
$
—

 
$
0.1

Certificate of deposits
10.4

 
—

 
—

 
—

 
10.4

Unrestricted cash equivalents
10.5

 
—

 
—

 
—

 
10.5

Commodities warehouse receipts
22.3

 
—

 
—

 
—

 
22.3

U.S. government obligations
—

 
50.5

 
—

 
—

 
50.5

Securities and other assets segregated under federal and other regulations
22.3

 
50.5

 
—

 
—

 
72.8

Money market funds
335.1

 
—

 
—

 
—

 
335.1

U.S. government obligations
—

 
1,318.3

 
—

 
—

 
1,318.3

Mortgage-backed securities
—

 
7.0

 
—

 
—

 
7.0

Derivatives
3,344.3

 
—

 
—

 
(3,494.7
)
 
(150.4
)
Deposits and receivables from exchange-clearing organizations
3,679.4

 
1,325.3

 
—

 
(3,494.7
)
 
1,510.0

Deposits and receivables from broker-dealers, clearing organizations and counterparties - derivatives
0.7

 
5.0

 
—

 
(6.4
)
 
(0.7
)
Common and preferred stock and American Depositary Receipts ("ADRs")
17.8

 
5.6

 
0.9

 
—

 
24.3

Exchangeable foreign ordinary equities and ADRs
10.0

 
—

 
—

 
—

 
10.0

Corporate and municipal bonds
0.3

 
0.6

 
3.6

 
—

 
4.5

U.S. government obligations
—

 
0.3

 
—

 
—

 
0.3

Foreign government obligations
14.8

 
—

 
—

 
—

 
14.8

Derivatives
315.6

 
785.3

 
—

 
(1,047.0
)
 
53.9

Commodities leases
—

 
135.2

 
—

 
(93.1
)
 
42.1

Commodities warehouse receipts
7.5

 
—

 
—

 
—

 
7.5

Exchange firm common stock
3.4

 
9.0

 
—

 
—

 
12.4

Mutual funds and other
1.9

 
—

 
—

 
—

 
1.9

Financial instruments owned
371.3

 
936.0

 
4.5

 
(1,140.1
)
 
171.7

Total assets at fair value
$
4,084.2

 
$
2,316.8

 
$
4.5

 
$
(4,641.2
)
 
$
1,764.3

Liabilities:
 
 
 
 
 
 
 
 
 
Accounts payable and other accrued liabilities - contingent liabilities
$
—

 
$
—

 
$
14.8

 
$
—

 
$
14.8

Payables to exchange-clearing organizations, broker-dealers and counterparties - derivatives
3,562.3

 
—

 
—

 
(3,562.3
)
 
—

Common and preferred stock and ADRs
16.4

 
5.9

 
—

 
—

 
22.3

Exchangeable foreign ordinary equities and ADRs
5.7

 
—

 
—

 
—

 
5.7

Derivatives
338.1

 
775.2

 
—

 
(1,068.7
)
 
44.6

Commodities leases
—

 
220.0

 
—

 
(117.2
)
 
102.8

Financial instruments sold, not yet purchased
360.2

 
1,001.1

 
—

 
(1,185.9
)
 
175.4

Total liabilities at fair value
$
3,922.5

 
$
1,001.1

 
$
14.8

 
$
(4,748.2
)
 
$
190.2

(1)
Represents cash collateral and the impact of netting across the levels of the fair value hierarchy. Netting among positions classified within the same level is included in that level.
Realized and unrealized gains and losses are included within ‘trading gains, net’ in the condensed consolidated income statements.
Information on Level 3 Financial Assets and Liabilities
The Company’s financial assets at fair value classified within level 3 of the fair value hierarchy as of June 30, 2013 and September 30, 2012 are summarized below:
 
(in millions)
June 30, 2013
 
September 30, 2012
Total level 3 assets
$
4.4

 
$
4.5

Level 3 assets for which the Company bears economic exposure
$
4.4

 
$
4.5

Total assets
$
2,907.4

 
$
2,958.9

Total financial assets at fair value
$
1,514.7

 
$
1,764.3

Total level 3 assets as a percentage of total assets
0.2
%
 
0.2
%
Level 3 assets for which the Company bears economic exposure as a percentage of total assets
0.2
%
 
0.2
%
Total level 3 assets as a percentage of total financial assets at fair value
0.3
%
 
0.3
%
The following tables set forth a summary of changes in the fair value of the Company’s level 3 financial assets and liabilities during the three and nine months ended June 30, 2013 and 2012, including a summary of unrealized gains (losses) during the respective periods on the Company’s level 3 financial assets and liabilities still held as of June 30, 2013.
 
Level 3 Financial Assets and Financial Liabilities
For the Three Months Ended June 30, 2013
 
 
(in millions)
Balances at
beginning of
period
 
Realized gains
(losses) during
period
 
Unrealized
gains (losses)
during period
 
Purchases/issuances
 
Settlements
 
Transfers in
or (out) of
Level 3
 
Balances at
end of period
Assets:
 
 
 
 
 
 
 
 
 
 
 
 
 
Common stock and ADRs
$
0.9

 
$
—

 
$
(0.1
)
 
$
—

 
$
—

 
$
—

 
$
0.8

Corporate and municipal bonds
3.8

 
—

 
(0.2
)
 
—

 
—

 
—

 
3.6

 
$
4.7

 
$
—

 
$
(0.3
)
 
$
—

 
$
—

 
$
—

 
$
4.4

Liabilities:
 
 
 
 
 
 
 
 
 
 
 
 
 
Contingent liabilities
$
18.4

 
$
—

 
$
0.8

 
$
—

 
$
(3.1
)
 
$
—

 
$
16.1

 
Level 3 Financial Assets and Financial Liabilities
For the Nine Months Ended June 30, 2013
 
 
(in millions)
Balances at
beginning of
period
 
Realized gains
(losses) during
period
 
Unrealized
gains (losses)
during period
 
Purchases/issuances
 
Settlements
 
Transfers in
or (out) of
Level 3
 
Balances at
end of period
Assets:
 
 
 
 
 
 
 
 
 
 
 
 
 
Common stock and ADRs
$
0.9

 
$
—

 
$
(0.1
)
 
$
—

 
$
—

 
$
—

 
$
0.8

Corporate and municipal bonds
3.6

 
—

 
—

 
—

 
—

 
—

 
3.6

 
$
4.5

 
$
—

 
$
(0.1
)
 
$
—

 
$
—

 
$
—

 
$
4.4

Liabilities:
 
 
 
 
 
 
 
 
 
 
 
 
 
Contingent liabilities
$
14.8

 
$
—

 
$
1.6

 
$
3.1

 
$
(3.4
)
 
$
—

 
$
16.1

 
Level 3 Financial Assets and Financial Liabilities
For the Three Months Ended June 30, 2012
 
 
(in millions)
Balances at
beginning of
period
 
Realized gains
(losses) during
period
 
Unrealized
gains (losses)
during period
 
Purchases/issuances
 
Settlements
 
Transfers in
or (out) of
Level 3
 
Balances at
end of period
Assets:
 
 
 
 
 
 
 
 
 
 
 
 
 
Common stock and ADRs
$
1.1

 
$
—

 
$
—

 
$
—

 
$
—

 
$
—

 
$
1.1

Corporate and municipal bonds
3.6

 
—

 
(0.1
)
 
—

 
—

 
—

 
3.5

Mutual funds and other
0.4

 
—

 
—

 
—

 
—

 
—

 
0.4

 
$
5.1

 
$
—

 
$
(0.1
)
 
$
—

 
$
—

 
$
—

 
$
5.0

Liabilities:
 
 
 
 
 
 
 
 
 
 
 
 
 
Contingent liabilities
$
23.3

 
$
—

 
$
0.5

 
$
—

 
$
(3.1
)
 
$
—

 
$
20.7

 
Level 3 Financial Assets and Financial Liabilities
For the Nine Months Ended June 30, 2012
 
 
(in millions)
Balances at
beginning of
period
 
Realized gains
(losses) during
period
 
Unrealized
gains (losses)
during period
 
Purchases/issuances
 
Settlements
 
Transfers in
or (out) of
Level 3
 
Balances at
end of period
Assets:
 
 
 
 
 
 
 
 
 
 
 
 
 
Common stock and ADRs
$
1.1

 
$
—

 
$
—

 
$
—

 
$
—

 
$
—

 
$
1.1

Corporate and municipal bonds
3.6

 
—

 
(0.1
)
 
—

 
—

 
—

 
3.5

Mutual funds and other
0.4

 
—

 
—

 
—

 
—

 
—

 
0.4

 
$
5.1

 
$
—

 
$
(0.1
)
 
$
—

 
$
—

 
$
—

 
$
5.0

Liabilities:
 
 
 
 
 
 
 
 
 
 
 
 
 
Contingent liabilities
$
22.3

 
$
—

 
$
1.8

 
$
—

 
$
(3.4
)
 
$
—

 
$
20.7


In accordance with the Fair Value Measurements and Disclosures Topic of the ASC, the Company has estimated on a recurring basis each period the fair value of debentures issued by a single asset owning company of Suriwongse Hotel located in Chiang Mai, Thailand. The Company has classified its investment in the hotel within level 3 of the fair value hierarchy because the fair value is determined using significant unobservable inputs, which include projected cash flows. These cash flows are discounted employing present value techniques. The Company estimates the fair value of its investment in these debentures by using a management-developed forecast, which is based on the income approach. The Company continues to evaluate the fair value of the debentures. There were no significant changes in the fair value of the debentures during the nine months ended June 30, 2013 and 2012.
The Company is required to make additional future cash payments based on certain financial performance measures of its acquired businesses. The Company is required to remeasure the fair value of the cash earnout arrangements on a recurring basis in accordance with the guidance in the Business Combinations Topic of the ASC. The Company has classified its net liabilities for the contingent earnout arrangements within level 3 of the fair value hierarchy because the fair value is determined using significant unobservable inputs, which include projected cash flows. The estimated fair value of the contingent purchase consideration is based upon management-developed forecasts, a level 3 input in the fair value hierarchy. These cash flows are discounted employing present value techniques in arriving at the acquisition-date fair value. The discount rate was developed using market participant company data and there have been no significant changes in the discount rate environment. From the dates of acquisition to June 30, 2013, certain acquisitions have had changes in the estimates of undiscounted cash flows, based on actual performances fluctuating from estimates. The fair value of the contingent consideration increased $0.8 million and $0.5 million during the three months ended June 30, 2013 and 2012, respectively, and $1.6 million and $1.8 million during the nine months ended June 30, 2013 and 2012, respectively, with the corresponding amount classified as ‘other expense’ within the condensed consolidated income statements.
The Company reports transfers in and out of levels 1, 2 and 3, as applicable, using the fair value of the securities as of the beginning of the reporting period in which the transfer occurred.
On March 31, 2013, the commodities market experienced downward limit price movements on certain commodities. As a result, certain exchange-traded derivative contracts, which would normally be valued using quoted market prices and classified as level 1 within the fair value hierarchy, were priced using a valuation model using observable inputs. Due to the change in valuation techniques because of the limit moves, some derivative assets and liabilities were classified as level 2 at March 31, 2013. Such derivative assets and liabilities were valued using quoted market prices, and as such, were classified as level 1 as of June 30, 2013 and prior to March 31, 2013. There were no significant similar occurrences of upward or downward limit price movements as of June 30, 2013.
Except as described above, the Company did not have any additional significant transfers between level 1 and level 2 fair value measurements for the nine months ended June 30, 2013 and 2012.
The Company has recorded unrealized gains, net of income tax expense, related to U.S. government obligations and corporate bonds classified as available-for-sale securities in other comprehensive income (“OCI”) as of June 30, 2013.
The following tables summarize the amortized cost basis, the aggregate fair value and gross unrealized holding gains and losses of the Company’s investment securities classified as available-for-sale as of June 30, 2013 and September 30, 2012:
June 30, 2013
Amounts included in deposits with and receivables from exchange-clearing organizations:
 
Amortized
Cost
 
Unrealized Holding(1)
 
Estimated
Fair Value
(in millions)
Gains
 
(Losses)
 
U.S. government obligations
$
799.1

 
$
—

 
$
—

 
$
799.1

Mortgage-backed securities
5.6

 
0.1

 
—

 
5.7

 
$
804.7

 
$
0.1

 
$
—

 
$
804.8

  (1) Unrealized gain/loss on U.S. government obligations as of June 30, 2013, were less than $0.1 million.
September 30, 2012
Amounts included in deposits with and receivables from exchange-clearing organizations:
 
Amortized
Cost
 
Unrealized Holding(1)
 
Estimated
Fair Value
(in millions)
Gains
 
(Losses)
 
U.S. government obligations
$
1,298.9

 
$
—

 
$
—

 
$
1,298.9

Mortgage-backed securities
6.8

 
0.1

 
—

 
6.9

 
$
1,305.7

 
$
0.1

 
$
—

 
$
1,305.8

(1) Unrealized gain/loss on U.S. government obligations as of September 30, 2012, were less than $0.1 million.
As of June 30, 2013 and September 30, 2012, investments in debt securities classified as available-for-sale (“AFS”) mature as follows:
June 30, 2013
 
Due in
 
Estimated
Fair Value
(in millions)
Less than 1 year
 
1 year or more
 
U.S. government obligations
$
799.1

 
$
—

 
$
799.1

Mortgage-backed securities
—

 
5.7

 
5.7

 
$
799.1

 
$
5.7

 
$
804.8

September 30, 2012
 
Due in
 
Estimated
Fair Value
(in millions)
Less than 1 year
 
1 year or more
 
U.S. government obligations
$
1,298.9

 
$
—

 
$
1,298.9

Mortgage-backed securities
—

 
6.9

 
6.9

 
$
1,298.9

 
$
6.9

 
$
1,305.8

There were no sales of AFS securities, other than noted below, during the nine months ended June 30, 2013 and 2012, and as a result, no realized gains or losses were recorded for the nine months ended June 30, 2013 and 2012.
For the purposes of the maturity schedule, mortgage-backed securities, which are not due at a single maturity date, have been allocated over maturity groupings based on the expected maturity of the underlying collateral. Mortgage-backed securities may mature earlier than their stated contractual maturities because of accelerated principal repayments of the underlying loans.
The Company has also classified equity investments in exchange firms’ common stock not pledged for clearing purposes as available-for-sale. The investments are recorded at fair value, with unrealized gains and losses recorded, net of taxes, as a component of OCI until realized. As of June 30, 2013, the cost and fair value of all the equity investments in exchange firms was $3.7 million and $4.6 million, respectively.
In June 2012, the board of LME Holdings Limited (“LME Holdings”), the parent company of The London Metal Exchange (“LME”), entered into a framework agreement regarding the terms of a recommended cash offer for the entire issued and outstanding ordinary share capital of LME Holdings. In July 2012, the shareholders of LME Holdings approved the sale of LME Holdings to the Hong Kong Exchanges & Clearing Limited. In December 2012, the Company received proceeds of $8.6 million from the sale of its shares in the LME. The shares of the LME were previously held by the Company as available-for-sale and the unrealized gain for those shares was reflected in OCI. For the nine months ended June 30, 2013, the Company reclassified the unrealized gain remaining in AOCI of approximately $6.3 million, net of income tax expense of $2.0 million, into the current period earnings.
The Company recorded unrealized gains of $0.7 million, net of income tax expense of $0.4 million, for the nine months ended June 30, 2013, in OCI related to the remaining equity investments in exchange firms as of June 30, 2013. The Company monitors the fair value of exchange common stock on a periodic basis, and does not consider any current unrealized losses to be anything other than a temporary impairment.
In December 2012, the Company sold its exchange membership seats in the Board of Trade of Kansas City, Missouri, Inc. (“KCBT”), in connection with the acquisition of the KCBT by Chicago Mercantile Exchange (“CME”). The Company was required to hold these exchange membership seats for clearing purposes and, as a result, the associated KCBT shares were being held at cost on the condensed consolidated balance sheet. The Company received proceeds of $1.5 million and recognized a gain of $0.9 million before taxes, during the nine months ended June 30, 2013, in connection with the sale of these seats.