Financial Assets And Financial Liabilities

9 Months Ended

Sep. 30, 2019

Financial Assets And Financial Liabilities [Abstract]

Financial Assets And Financial Liabilities

6. Financial Assets and Financial Liabilities

Financial Assets and Liabilities Measured at Fair Value on a Recurring Basis

The following tables set forth, by level within the fair value hierarchy (see Note 2), financial assets and liabilities, measured at fair value on a recurring basis as of September 30, 2019 and December 31, 2018. As required by ASC Topic 820, financial assets and financial liabilities are classified in their entirety based on the lowest level of input that is significant to the respective fair value measurement.



	Financial Assets at Fair Value as of September 30, 2019

	Level 1		Level 2		Level 3		Total

	(in millions)
Securities segregated for regulatory purposes	$	3,787	$	—	$	—	$	3,787
Financial instruments owned, at fair value
Stocks		543		—		—		543
Options		1,293		—		—		1,293
Warrants		—		—		—		—
U.S. and foreign government securities		42		—		—		42
Corporate bonds		—		—		3		3
Currency forward contracts		—		2		—		2
Total financial instruments owned, at fair value		1,878		2		3		1,883

Other assets - other investments at fair value		43		—		—		43
Total financial assets at fair value	$	5,708	$	2	$	3	$	5,713



	Financial Liabilities at Fair Value as of September 30, 2019
	Level 1		Level 2		Level 3		Total

	(in millions)
Financial instruments sold, but not yet purchased, at fair value
Stocks	$	467	$	—	$	—	$	467
Options		495		—		—		495
Currency forward contracts		—		15		—		15
Total financial instruments sold, but not yet purchased, at fair value		962		15		—		977
Total financial liabilities at fair value	$	962	$	15	$	—	$	977

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	Financial Assets at Fair Value as of December 31, 2018
	Level 1		Level 2		Level 3		Total

	(in millions)
Securities segregated for regulatory purposes	$	4,213	$	—	$	—	$	4,213
Financial instruments owned, at fair value
Stocks		494		—		—		494
Options		1,479		—		—		1,479
Warrants		1		—		—		1
U.S. and foreign government securities		113		—		—		113
Corporate and municipal bonds		—		1		3		4
Currency forward contracts		—		28		—		28
Total financial instruments owned, at fair value		2,087		29		3		2,119
Total financial assets at fair value	$	6,300	$	29	$	3	$	6,332



	Financial Liabilities at Fair Value as of December 31, 2018
	Level 1		Level 2		Level 3		Total

	(in millions)
Financial instruments sold, but not yet purchased, at fair value
Stocks	$	273	$	—	$	—	$	273
Options		404		—		—		404
Currency forward contracts		—		4		—		4
Total financial instruments sold, but not yet purchased, at fair value		677		4		—		681
Total financial liabilities at fair value	$	677	$	4	$	—	$	681

Transfers between Level 1 and Level 2

Transfers of financial assets and financial liabilities at fair value to or from Levels 1 and 2 arise where the market for a specific financial instrument has become active or inactive during the period. The fair values transferred are ascribed as if the financial assets or financial liabilities had been transferred as of the end of the period.

Level 3 Financial Assets and Financial Liabilities

The Company’s Level 3 financial assets are comprised of delisted and illiquid securities reported within financial instruments owned, at fair value in the condensed consolidated statements of financial condition. As of September 30, 2019, Level 3 financial assets included $3 million in corporate bonds, which were not traded in active markets and were valued by the Company based on internal estimates.

During the nine months ended September 30, 2019 and 2018, no transfers occurred between levels for financial assets and liabilities, at fair value.

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Trading Gains from Market Making Transactions

Trading gains and losses from market making transactions reported in the condensed consolidated statements of comprehensive income, by major product type, are comprised of:



	Three Months Ended September 30,				Nine Months Ended September 30,
	2019		2018		2019		2018
	(in millions)
Equities	$	7	$	7	$	20	$	32
Foreign exchange		—		—		—		—
Total trading gains, net	$	7	$	7	$	20	$	32

These transactions are related to the Company’s financial instruments owned and financial instruments sold, but not yet purchased, at fair value and include both derivative and non-derivative financial instruments, including exchange traded options and futures. These gains and losses also include market making related dividend income and expense.

Financial Assets and Liabilities Not Measured at Fair Value

The following tables represent the carrying value, fair value, and fair value hierarchy category of certain financial assets and liabilities that are not recorded at fair value in the Company's condensed consolidated statements of financial condition. The following table excludes certain financial instruments such as equity investments and all non-financial assets and liabilities:



	September 30, 2019
	Carrying ‎Value		Fair ‎Value		Level 1		Level 2		Level 3

	(in millions)
Financial assets, not measured at fair value
Cash and cash equivalents	$	3,035	$	3,035	$	3,035	$	—	$	—
Cash - segregated for regulatory purposes		8,794		8,794		8,794		—		—
Securities - segregated for regulatory purposes		17,459		17,459		—		17,459		—
Securities borrowed		4,010		4,010		—		4,010		—
Securities purchased under agreements to resell		1,391		1,391		—		1,391		—
Receivables from customer		25,970		25,970		—		25,970		—
Receivables from broker, dealers, and clearing organizations		868		868		—		868		—
Interest receivable		131		131		—		131		—
Other assets		9		9		—		4		5
Total financial assets, not measured at fair value	$	61,667	$	61,667	$	11,829	$	49,833	$	5



Financial liabilities, not measured at fair value
Short-term borrowings	$	15	$	15	$	—	$	15	$	—
Securities loaned		3,955		3,955		—		3,955		—
Payables to customer		54,474		54,474		—		54,474		—
Payables to brokers, dealers and clearing organizations		245		245		—		245		—
Interest payable		37		37		—		37		—
Total financial liabilities, not measured at fair value	$	58,726	$	58,726	$	—	$	58,726	$	—

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	December 31, 2018
	Carrying ‎Value		Fair ‎Value		Level 1		Level 2		Level 3
	(in millions)
Financial assets, not measured at fair value
Cash and cash equivalents	$	2,597	$	2,597	$	2,597	$	—	$	—
Cash - segregated for regulatory purposes		7,503		7,503		7,503		—		—
Securities - segregated for regulatory purposes		11,382		11,382		—		11,382		—
Securities borrowed		3,331		3,331		—		3,331		—
Securities purchased under agreements to resell		1,242		1,242		—		1,242		—
Receivables from customer		27,017		27,017		—		27,017		—
Receivables from broker, dealers, and clearing organizations		706		706		—		706		—
Interest receivable		141		141		—		141		—
Other assets		5		6		—		6		—
Total financial assets, not measured at fair value	$	53,924	$	53,925	$	10,100	$	43,825	$	—



Financial liabilities, not measured at fair value
Short-term borrowings	$	17	$	17	$	—	$	17	$	—
Securities loaned		4,037		4,037		—		4,037		—
Payables to customer		47,993		47,993		—		47,993		—
Payables to brokers, dealers and clearing organizations		298		298		—		298		—
Interest payable		41		41		—		41		—
Total financial liabilities, not measured at fair value	$	52,386	$	52,386	$	—	$	52,386	$	—

Netting of Financial Assets and Financial Liabilities

The Company’s policy is to net securities borrowed and securities loaned, and securities purchased under agreements to resell and securities sold under agreements to repurchase that meet the offsetting requirements prescribed in ASC Topic 210-20. In the tables below, the amounts of financial instruments that are not offset in the condensed consolidated statements of financial condition, but could be netted against cash or financial instruments with specific counterparties under master netting agreements, according to the terms of the agreements, including clearing houses (exchange traded options, warrants and discount certificates) or over the counter currency forward contract counterparties, are presented to provide financial statement readers with the Company’s net payable or receivable with counterparties for these financial instruments.

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The following tables set forth the netting of financial assets and of financial liabilities as of September 30, 2019 and December 31, 2018:



	September 30, 2019
	Gross			Amounts			Net Amounts		Amounts Not Offset
	Amounts			Offset in the			Presented in		in the Condensed
	of Financial			Condensed			the Condensed		Consolidated Statement
	Assets and			Consolidated			Consolidated		of Financial Condition
	Liabilities			Statement of			Statement of		Cash or Financial
	Recognized			Financial Condition		²	Financial Condition		Instruments		Net Amount

	(in millions)
Offsetting of financial assets
Securities segregated for regulatory purposes - purchased under agreements to resell	$	17,459	¹	$	—		$	17,459	$	(17,459)	$	—
Securities borrowed		4,010			—			4,010		(3,856)		154
Securities purchased under agreements to resell		1,391			—			1,391		(1,391)		—
Financial instruments owned, at fair value
Options		1,293			—			1,293		(492)		801
Warrants		—			—			—		—		—
Currency forward contracts		2			—			2		—		2
Total	$	24,155		$	—		$	24,155	$	(23,198)	$	957


	(in millions)
Offsetting of financial liabilities
Securities loaned	$	3,955	$	—	$	3,955	$	(3,720)	$	235
Financial instruments sold, but not yet purchased, at fair value
Options		495		—		495		(492)		3
Currency forward contracts		15		—		15		—		15
Total	$	4,465	$	—	$	4,465	$	(4,212)	$	253

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	December 31, 2018
		Gross		Amounts			Net Amounts		Amounts Not Offset
		Amounts		Offset in the			Presented in		in the Condensed
		of Financial		Condensed			the Condensed		Consolidated Statement
		Assets and		Consolidated			Consolidated		of Financial Condition
		Liabilities		Statement of			Statement of		Cash or Financial
		Recognized		Financial Condition		²	Financial Condition		Instruments		Net Amount

	(in millions)
Offsetting of financial assets
Securities segregated for regulatory purposes - purchased under agreements to resell	$	11,382	¹	$	—		$	11,382	$	(11,382)	$	—
Securities borrowed		3,331			—			3,331		(3,199)		132
Securities purchased under agreements to resell		1,242			—			1,242		(1,242)		—
Financial instruments owned, at fair value
Options		1,479			—			1,479		(398)		1,081
Warrants		1			—			1		—		1
Currency forward contracts		28			—			28		—		28
Total	$	17,463		$	—		$	17,463	$	(16,221)	$	1,242


	(in millions)
Offsetting of financial liabilities
Securities loaned	$	4,037	$	—	$	4,037	$	(3,838)	$	199
Financial instruments sold, but not yet purchased, at fair value
Options		404		—		404		(398)		6
Currency forward contracts		4		—		4		—		4
Total	$	4,445	$	—	$	4,445	$	(4,236)	$	209

(1)As of September 30, 2019 and December 31, 2018, the Company had $17.5 billion and $11.4 billion, respectively, of securities purchased under agreements to resell that were segregated to satisfy regulatory requirements. These securities are included in “Securities - segregated for regulatory purposes” in the condensed consolidated statements of financial condition.
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(2)The Company did not have any balances eligible for netting in accordance with ASC Topic 210-20 at September 30, 2019 and December 31, 2018.

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Secured Financing Transactions – Maturities and Collateral Pledged

The following tables present gross obligations for securities loaned transactions by remaining contractual maturity and class of collateral pledged as of September 30, 2019 and December 31, 2018:



	September 30, 2019
	Remaining Contractual Maturity
	Overnight		Less than		30 – 90		Over 90
	and Open		30 days		days		days		Total

	(in millions)
Securities loaned
Stocks	$	3,888	$	—	$	—	$	—	$	3,888
Corporate bonds		66		—		—		—		66
Foreign government securities		1		—		—		—		1
Total securities loaned	$	3,955	$	—	$	—	$	—	$	3,955


	December 31, 2018
	Remaining Contractual Maturity
	Overnight		Less than		30 – 90		Over 90
	and Open		30 days		days		days		Total

	(in millions)
Securities loaned
Stocks	$	3,970	$	—	$	—	$	—	$	3,970
Corporate bonds		65		—		—		—		65
Foreign government securities		2		—		—		—		2
Total securities loaned	$	4,037	$	—	$	—	$	—	$	4,037

- Definition

The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

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