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Fair Value of Financial Instruments | 6 Months Ended
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Jun. 30, 2024
Fair Value Disclosures [Abstract] |
Fair Value of Financial Instruments | Fair Value of Financial Instruments Financial Instruments Measured at Fair Value The Company’s financial instruments measured at fair value on the condensed consolidated statements of financial condition as of June 30, 2024 and December 31, 2023 have been categorized based upon the fair value hierarchy as follows:
|  | Quoted Prices in active Markets for Identical Assets (Level 1) |  | Significant Observable Inputs (Level 2) |  | Significant Unobservable Inputs (Level 3) |  | Total
|  | (dollars in thousands)
As of June 30, 2024 |  |  |  |  |  |  |  |
Assets |  |  |  |  |  |  |  |
Cash equivalents – Money market funds and other highly liquid investments |  | $ | 1,562,815 |  |  | $ | — |  |  | $ | — |  |  | $ | 1,562,815 |
Receivable and due from affiliates – Foreign exchange derivative contracts |  | — |  |  | 2,626 |  |  | — |  |  | 2,626 |
Other assets – Investment in available for sale debt securities |  | — |  |  | — |  |  | 10,102 |  |  | 10,102 |
Total assets measured at fair value |  | $ | 1,562,815 |  |  | $ | 2,626 |  |  | $ | 10,102 |  |  | $ | 1,575,543 |
As of December 31, 2023 |  |  |  |  |  |  |  |
Assets |  |  |  |  |  |  |  |
Cash equivalents – Money market funds and other highly liquid investments |  | $ | 1,543,644 |  |  | $ | — |  |  | $ | — |  |  | $ | 1,543,644 |
Total assets measured at fair value |  | $ | 1,543,644 |  |  | $ | — |  |  | $ | — |  |  | $ | 1,543,644 |
Liabilities |  |  |  |  |  |  |  |
Payable and due to affiliates – Foreign exchange derivative contracts |  | $ | — |  |  | $ | 775 |  |  | $ | — |  |  | $ | 775 |
Total liabilities measured at fair value |  | $ | — |  |  | $ | 775 |  |  | $ | — |  |  | $ | 775 |
The Company’s cash equivalents are classified within level 1 of the fair value hierarchy because they are valued using quoted market prices in active markets. In April 2024, the Company made an investment in a convertible note with a principal amount and original amortized cost basis of $10.0 million. The note accrues interest at a rate of 5% per annum, compounded annually, and matures on the earliest to occur of January 19, 2027, an event of default or a change in control as each term is defined in the convertible note. The note and accrued interest will convert to equity securities of the issuer on January 19, 2027, if not previously repaid or converted upon certain defined financing events. The convertible note is accounted for as an available-for-sale debt security and the convertible note and accrued interest is included within other assets on the accompanying condensed consolidated statements of financial condition at a fair value and amortized cost basis of $10.1 million as of June 30, 2024. There were no fair value adjustments or credit losses recorded on the convertible note during the three and six months ended June 30, 2024. The convertible note is classified within level 3 of the fair value hierarchy because the valuation requires assumptions that are both significant and unobservable. The primary methods used to estimate the fair value of the convertible note were a discounted cash flow analysis and a probability-weighted expected return model which incorporated the credit risk of the issuer and scenarios in which the note would convert into equity, the estimated equity value of the issuer and the conversion terms outlined in the convertible note agreement. Significant unobservable inputs included a discount rate of 15%. Significant increases or decreases in the discount rate would have resulted in a significantly lower or higher fair value measurement. The Company enters into foreign currency forward contracts to mitigate its U.S. dollar and British pound sterling versus euro exposure, generally with a duration of less than 12 months. On June 1, 2023, the Company entered into a foreign currency call option on Australian dollars, giving the Company an option to buy A$120.7 million ($79.9 million U.S. dollars as translated as of June 30, 2023), in order to partially mitigate the Company’s U.S. dollar versus Australian dollar foreign exchange exposure on the then anticipated payment of the Australian dollar denominated purchase price for the Yieldbroker acquisition. The valuations for the Company’s foreign currency forward contracts and foreign currency call option are primarily based on the difference between the exchange rate associated with the contract and the exchange rate at the current period end for the tenor of the contract. Foreign currency forward contracts and the foreign currency call option are categorized as Level 2 in the fair value hierarchy. As of June 30, 2024 and December 31, 2023, the counterparty on each of these foreign exchange derivative contracts was an affiliate of LSEG and therefore the corresponding assets or liabilities on such contracts were included in receivable and due from affiliates or payable and due to affiliates, respectively, on the accompanying condensed consolidated statements of financial condition. The following table summarizes the aggregate U.S. dollar equivalent notional amount of the Company’s foreign exchange derivative contracts not designated as hedges for accounting purposes:
|  | June 30, |  | December 31,
|  | 2024 |  | 2023
|  | (dollars in thousands)
Foreign currency forward contracts – Gross notional amount |  | $ | 229,131 |  |  | $ | 192,877 |
The Company’s foreign exchange derivative contracts are not designated as hedges for accounting purposes and changes in the fair value of these contracts during the period are recognized in the condensed consolidated statements of income. The total realized and unrealized gains (losses) on foreign exchange derivative contracts recorded within the condensed consolidated statements of income are as follows:
|  | Three Months Ended |  | Six Months Ended
|  | June 30, |  | June 30,
|  | 2024 |  | 2023 |  | 2024 |  | 2023
| (dollars in thousands)
Foreign currency forward contracts not designated in accounting hedge relationship – General and administrative (expenses)/income |  | $ | 2,560 |  |  | $ | 2,198 |  |  | $ | 6,911 |  |  | $ | 1,038 |
Foreign currency call option contract not designated in accounting hedge relationship – Other income/(loss) (1) |  | $ | — |  |  | $ | 618 |  |  | $ | — |  |  | $ | 618 |
(1) On June 1, 2023, the Company entered into a foreign currency call option on Australian dollars, in order to partially mitigate the Company’s U.S. dollar versus Australian dollar foreign exchange exposure on the then-anticipated payment of the Australian dollar denominated purchase price for the Yieldbroker Acquisition. On August 25, 2023, the Company unwound the out-of-the-money foreign currency call option and received $1.1 million. Financial Instruments Not Measured at Fair Value The Company’s financial instruments not measured at fair value on the condensed consolidated statements of financial condition as of June 30, 2024 and December 31, 2023 have been categorized based upon the fair value hierarchy as follows:
|  | Carrying Value |  | Quoted Prices in active Markets for Identical Assets (Level 1) |  | Significant Observable Inputs (Level 2) |  | Significant Unobservable Inputs (Level 3) |  | Total Fair Value
As of June 30, 2024 |  | (dollars in thousands)
Assets |  |  |  |  |  |  |  |  |  |
Cash and restricted cash |  | $ | 156,415 |  |  | $ | 156,415 |  |  | $ | — |  |  | $ | — |  |  | $ | 156,415 |
Receivable from brokers and dealers and clearing organizations |  | 432,037 |  |  | — |  |  | 432,037 |  |  | — |  |  | 432,037 |
Deposits with clearing organizations |  | 62,694 |  |  | 62,694 |  |  | — |  |  | — |  |  | 62,694 |
Accounts receivable |  | 233,084 |  |  | — |  |  | 233,084 |  |  | — |  |  | 233,084 |
Other assets – Memberships in clearing organizations |  | 2,907 |  |  | — |  |  | — |  |  | 2,907 |  |  | 2,907 |
Total |  | $ | 887,137 |  |  | $ | 219,109 |  |  | $ | 665,121 |  |  | $ | 2,907 |  |  | $ | 887,137 |
Liabilities |  |  |  |  |  |  |  |  |  |
Securities sold under agreements to repurchase |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |
Payable to brokers and dealers and clearing organizations |  | 424,751 |  |  | — |  |  | 424,751 |  |  | — |  |  | 424,751 |
Total |  | $ | 424,751 |  |  | $ | — |  |  | $ | 424,751 |  |  | $ | — |  |  | $ | 424,751 |
As of December 31, 2023 |  |  |  |  |  |  |  |  |  |
Assets |  |  |  |  |  |  |  |  |  |
Cash and restricted cash |  | $ | 163,824 |  |  | $ | 163,824 |  |  | $ | — |  |  | $ | — |  |  | $ | 163,824 |
Receivable from brokers and dealers and clearing organizations |  | 381,178 |  |  | — |  |  | 381,178 |  |  | — |  |  | 381,178 |
Deposits with clearing organizations |  | 36,806 |  |  | 36,806 |  |  | — |  |  | — |  |  | 36,806 |
Accounts receivable |  | 168,407 |  |  | — |  |  | 168,407 |  |  | — |  |  | 168,407 |
Other assets – Memberships in clearing organizations |  | 2,426 |  |  | — |  |  | — |  |  | 2,426 |  |  | 2,426 |
Total |  | $ | 752,641 |  |  | $ | 200,630 |  |  | $ | 549,585 |  |  | $ | 2,426 |  |  | $ | 752,641 |
Liabilities |  |  |  |  |  |  |  |  |  |
Securities sold under agreements to repurchase(1) |  | $ | 21,612 |  |  | $ | — |  |  | $ | 21,612 |  |  | $ | — |  |  | $ | 21,612 |
Payable to brokers and dealers and clearing organizations |  | 351,864 |  |  | — |  |  | 351,864 |  |  | — |  |  | 351,864 |
Total |  | $ | 373,476 |  |  | $ | — |  |  | $ | 373,476 |  |  | $ | — |  |  | $ | 373,476 |
(1)As of December 31, 2023, Treasury securities with a fair value of $21.6 million collateralized the securities sold under agreements to repurchase liability. The liability amounts presented represent the gross liability and are not offset on the condensed consolidated statements of financial condition. The securities sold under agreements to repurchase liability were subsequently settled on January 2, 2024. The carrying value of financial instruments not measured at fair value classified within level 1 or level 2 of the fair value hierarchy approximates fair value because of the relatively short term nature of the underlying assets or liabilities. The memberships in clearing organizations, which are included in other assets on the condensed consolidated statements of financial condition, are classified within level 3 of the fair value hierarchy because the valuation requires assumptions that are both significant and unobservable. Non-recurring Fair Value Measurements The Company measures certain assets and liabilities, such as assets acquired in a business combination, at fair value as of the acquisition date. See Note 4 – Acquisitions for further details regarding these non-recurring fair value measurements. Financial Instruments Without Readily Determinable Fair Values Included in other assets on the condensed consolidated statements of financial condition are equity investments without readily determinable fair values of $10.5 million and $8.9 million as of June 30, 2024 and December 31, 2023, respectively. These equity investments are subject to general contractual sale restrictions that prohibit the transfer or sale of the investment without prior consent of the investee.

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- 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. + References Reference 1: http://www.xbrl.org/2003/role/exampleRef -Topic 820 -SubTopic 10 -Name Accounting Standards Codification -Section 55 -Paragraph 107 -Publisher FASB -URI https://asc.fasb.org/1943274/2147482078/820-10-55-107 Reference 2: http://www.xbrl.org/2003/role/exampleRef -Topic 820 -SubTopic 10 -Name Accounting Standards Codification -Section 55 -Paragraph 100 -Publisher FASB -URI https://asc.fasb.org/1943274/2147482078/820-10-55-100 Reference 3: http://www.xbrl.org/2003/role/disclosureRef -Topic 820 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 2 -Subparagraph (c)(3) -Publisher FASB -URI https://asc.fasb.org/1943274/2147482106/820-10-50-2 Reference 4: http://www.xbrl.org/2003/role/disclosureRef -Topic 820 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 6A -Subparagraph (a) -Publisher FASB -URI https://asc.fasb.org/1943274/2147482106/820-10-50-6A Reference 5: http://www.xbrl.org/2003/role/disclosureRef -Topic 820 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 2E -Publisher FASB -URI https://asc.fasb.org/1943274/2147482106/820-10-50-2E Reference 6: http://www.xbrl.org/2003/role/disclosureRef -Topic 820 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 6A -Subparagraph (h) -Publisher FASB -URI https://asc.fasb.org/1943274/2147482106/820-10-50-6A Reference 7: http://www.xbrl.org/2003/role/disclosureRef -Topic 820 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 6A -Subparagraph (f) -Publisher FASB -URI https://asc.fasb.org/1943274/2147482106/820-10-50-6A Reference 8: http://www.xbrl.org/2003/role/disclosureRef -Topic 820 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 6A -Subparagraph (e) -Publisher FASB -URI https://asc.fasb.org/1943274/2147482106/820-10-50-6A Reference 9: http://www.xbrl.org/2003/role/disclosureRef -Topic 820 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 6A -Subparagraph (d) -Publisher FASB -URI https://asc.fasb.org/1943274/2147482106/820-10-50-6A Reference 10: http://www.xbrl.org/2003/role/disclosureRef -Topic 820 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 2 -Subparagraph (h) -Publisher FASB -URI https://asc.fasb.org/1943274/2147482106/820-10-50-2 Reference 11: http://www.xbrl.org/2003/role/disclosureRef -Topic 820 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 2 -Subparagraph (g) -Publisher FASB -URI https://asc.fasb.org/1943274/2147482106/820-10-50-2 Reference 12: http://www.xbrl.org/2003/role/disclosureRef -Topic 940 -SubTopic 820 -Name Accounting Standards Codification -Section 50 -Paragraph 1 -Subparagraph (a) -Publisher FASB -URI https://asc.fasb.org/1943274/2147478119/940-820-50-1 + Details
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