13.	Fair Value of Financial Assets and Liabilities

Fair Value Measurements on a Recurring Basis

U.S. GAAP guidance establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy are as follows:

Level 1 measurements—Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities.

Level 2 measurements—Quoted prices in markets that are not active or financial instruments for which all significant inputs are observable, either directly or indirectly.

Level 3 measurements—Prices or valuations that require inputs that are both significant to the fair value measurement and unobservable.

As required by U.S. GAAP guidance, financial assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement.

The following tables set forth by level within the fair value hierarchy financial assets and liabilities carried at fair value at September 30, 2018 and December 31, 2017 (in thousands):

	Assets at Fair Value at September 30, 2018
	Level 1		Level 2 ¹		Level 3		Netting and Collateral			Total
Loans held for sale, at fair value	$	—	$	1,132,665	$	—	$	—		$	1,132,665
Marketable securities		152,485		—		—		—			152,485
Government debt		75,346		—		—		—			75,346
Securities owned—Equities		565		—		—		—			565
Forwards		—		64,949		20,515		—			85,464
Rate lock commitments		—		—		6,219		—			6,219
Foreign exchange swaps		—		3,586		—		(630	)		2,956
Futures		—		34,405		—		(34,301	)		104
Foreign exchange/commodities options		210,086		—		—		(210,085	)		1
Total	$	438,482	$	1,235,605	$	26,734	$	(245,016	)	$	1,455,805

In addition, the Company has equity securities with a fair value of approximately $49.1 million, which are presented in “Other Assets” in the Company’s unaudited condensed consolidated statements of financial condition as of September 30, 2018. These investments are remeasured to fair value on a non-recurring basis and are classified within Level 2 in the fair value hierarchy.

	Liabilities at Fair Value at September 30, 2018
	Level 1		Level 2		Level 3		Netting and Collateral			Total
Foreign exchange/commodities options	$	258,918	$	—	$	—	$	(210,085	)	$	48,833
Rate lock commitments		—		—		12,089		—			12,089
Foreign exchange swaps		—		2,930		—		(630	)		2,300
Forwards		—		537		37		—			574
Futures		—		34,301		—		(34,301	)		—
Contingent consideration		—		—		61,076		—			61,076
Total	$	258,918	$	37,768	$	73,202	$	(245,016	)	$	124,872

	Assets at Fair Value at December 31, 2017
	Level 1		Level 2		Level 3		Netting and Collateral			Total
Loans held for sale, at fair value	$	—	$	362,635	$	—	$	—		$	362,635
Marketable securities		208,176	—		—		—				208,176
Government debt		32,744		—		—		—			32,744
Securities owned—Equities		263		—		—		—			263
Foreign exchange/commodities options		31,834	—		—			(27,418	)		4,416
Forwards		—		610		3,753		(101	)		4,262
Rate lock commitments		—	—			2,923		—			2,923
Foreign exchange swaps		—		1,135		—		(334	)		801
Interest rate swaps		—		242	—		—				242
Futures		—		78,969		—		(78,944	)		25
Total	$	273,017	$	443,591	$	6,676	$	(106,797	)	$	616,487

	Liabilities at Fair Value at December 31, 2017
	Level 1		Level 2		Level 3		Netting and Collateral			Total
Foreign exchange swaps	$	—	$	3,180	$	—	$	(334	)	$	2,846
Rate lock commitments		—		—		2,390		—			2,390
Forwards		—		927		657		(101	)		1,483
Futures		—		80,010		—		(78,944	)		1,066
Foreign exchange/commodities options		27,548		—		—		(27,418	)		130
Equity options		18		—		—		—			18
Contingent consideration		—		—		67,172		—			67,172
Total	$	27,566	$	84,117	$	70,219	$	(106,797	)	$	75,105

Level 3 Financial Assets and Liabilities

Changes in Level 3 assets and liabilities measured at fair value on a recurring basis for the three months ended September 30, 2018 were as follows (in thousands):

	Opening Balance as of July 1, 2018		Total realized and unrealized gains (losses) included in Net income (loss)			Unrealized gains (losses) included in Other comprehensive income (loss)		Purchases/Issuances		Sales/Settlements			Closing Balance at September 30, 2018		Unrealized gains (losses) for Level 3 Assets / Liabilities Outstanding at September 30, 2018
Assets
Rate lock commitments and forwards, net	$	16,304	$	14,608		$	—	$	—	$	(16,304	)	$	14,608	$	14,608
Liabilities
Accounts payable, accrued and other liabilities:
Contingent consideration¹	$	53,164	$	(966	)	$	291	$	7,482	$	(245	)	$	61,076	$	(675	)

¹	Realized and unrealized gains (losses) are reported in “Other expenses” and “Other income (loss),” as applicable, in the Company’s unaudited condensed consolidated statements of operations.

Changes in Level 3 assets and liabilities measured at fair value on a recurring basis for the three months ended September 30, 2017 were as follows (in thousands):

	Opening Balance as of July 1, 2017		Total realized and unrealized gains (losses) included in Net income (loss)			Unrealized gains (losses) included in Other comprehensive income (loss)			Purchases/Issuances		Sales/Settlements			Closing Balance at September 30, 2017		Unrealized gains (losses) for Level 3 Assets / Liabilities Outstanding at September 30, 2017
Assets
Rate lock commitments and forwards, net	$	10,566	$	10,070		$	—		$	—	$	(10,566	)	$	10,070	$	10,070
Liabilities
Accounts payable, accrued and other liabilities:
Contingent consideration¹	$	68,838	$	(1,965	)	$	(881	)	$	1,262	$	(1,702	)	$	71,244	$	(2,846	)

¹	Realized and unrealized gains (losses) are reported in “Other expenses” and “Other income (loss),” as applicable, in the Company’s unaudited condensed consolidated statements of operations.

Changes in Level 3 assets and liabilities measured at fair value on a recurring basis for the nine months ended September 30, 2018 were as follows (in thousands):

	Opening Balance as of January 1, 2018		Total realized and unrealized gains (losses) included in Net income (loss)			Unrealized gains (losses) included in Other comprehensive income (loss)		Issuances		Settlements			Closing Balance at September 30, 2018		Unrealized gains (losses) for Level 3 Assets / Liabilities Outstanding at September 30, 2018
Assets
Rate lock commitments and forwards, net	$	3,629	$	14,608		$	—	$	—	$	(3,629	)	$	14,608	$	14,608
Liabilities
Accounts payable, accrued and other liabilities:
Contingent consideration¹	$	67,172	$	(2,009	)	$	845	$	8,191	$	(15,451	)	$	61,076	$	(1,164	)

¹	Realized and unrealized gains (losses) are reported in “Other expenses” and “Other income (loss),” as applicable, in the Company’s unaudited condensed consolidated statements of operations.

Changes in Level 3 assets and liabilities measured at fair value on a recurring basis for the nine months ended September 30, 2017 were as follows (in thousands):

	Opening Balance as of January 1, 2017		Total realized and unrealized gains (losses) included in Net income (loss)			Unrealized gains (losses) included in Other comprehensive income (loss)			Issuances		Settlements			Closing Balance at September 30, 2017		Unrealized gains (losses) for Level 3 Assets / Liabilities Outstanding at September 30, 2017
Assets
Rate lock commitments and forwards, net	$	10,254	$	10,070		$	—		$	—	$	(10,254	)	$	10,070	$	10,070
Liabilities
Accounts payable, accrued and other liabilities:
Contingent consideration¹	$	65,838	$	(5,952	)	$	(2,040	)	$	9,624	$	(12,210	)	$	71,244	$	(7,992	)

¹	Realized and unrealized gains (losses) are reported in “Other expenses” and “Other income (loss),” as applicable, in the Company’s unaudited condensed consolidated statements of operations.

Quantitative Information About Level 3 Fair Value Measurements on a Recurring Basis

The following tables present quantitative information about the significant unobservable inputs utilized by the Company in the fair value measurement of Level 3 assets and liabilities measured at fair value on a recurring basis (in thousands):

Fair Value

as of

September 30,

2018

Assets

Liabilities

Valuation Technique

Unobservable Inputs

Range

Weighted

Average

Rate lock commitments

6,219

12,089

Discounted cash flow model and other observable market data

Counterparty credit risk

N/A

Forwards

20,515

Discounted cash flow model and other observable market data

Counterparty credit risk

N/A

Contingent consideration

—

61,076

Present value of

expected payments

Discount rate

Probability of meeting earnout and contingencies

3.3%-10.4%

75%-100%

8.4%

97%¹

¹	The probability of meeting the earnout targets as of September 30, 2018 was based on the acquired businesses’ projected future financial performance, including revenues.

Fair Value

as of

December 31,

2017

Assets

Liabilities

Valuation Technique

Unobservable Inputs

Range

Weighted

Average

Rate lock commitments

2,923

2,390

Discounted cash flow model and other observable market data

Counterparty credit risk

N/A

Forwards

3,753

657

Discounted cash flow model and other observable market data

Counterparty credit risk

N/A

Contingent consideration

—

67,172

Present value of

expected payments

Discount rate

Probability of meeting earnout and contingencies

3.3%-10.4%

75%-100%

8.2%

97%¹

¹	The probability of meeting the earnout targets as of December 31, 2017 was based on the acquired businesses’ projected future financial performance, including revenues.

Information About Uncertainty of Level 3 Fair Value Measurements

The significant unobservable input used in the fair value of the Company’s rate lock commitments and forwards is the counterparty credit risk. The significant unobservable inputs used in the fair value of the Company’s contingent consideration are the discount rate and forecasted financial information. Significant increases (decreases) in the discount rate would have resulted in a significantly lower (higher) fair value measurement. Significant increases (decreases) in the forecasted financial information would have resulted in a significantly higher (lower) fair value measurement. As of September 30, 2018 and December 31, 2017, the present value of expected payments related to the Company’s contingent consideration was $61.1 million and $67.2 million, respectively. The undiscounted value of the payments, assuming that all contingencies are met, would be $84.7 million and $85.2 million, as of September 30, 2018 and December 31, 2017, respectively.

Fair Value Measurements on a Non-Recurring Basis

Pursuant to the new recognition and measurement guidance for equity investments, effective January 1, 2018, equity investments carried under the measurement alternative are remeasured at fair value on a non-recurring basis to reflect observable transactions which occurred during the period. The Company applied the measurement alternative to equity securities with the fair value of approximately $49.1 million, which were included in “Other Assets” in the Company’s unaudited condensed consolidated statements of financial condition as of September 30, 2018. These investments are classified within Level 2 in the fair value hierarchy, because their estimated fair value is based on valuation methods using the observable transaction price at the transaction date.