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Securities Owned and Securities Sold, but not yet Purchased (and Fair Value Measurement) | 9 Months Ended
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Sep. 30, 2017
Fair Value Disclosures [Abstract] |
Securities Owned and Securities Sold, but not yet Purchased (and Fair Value Measurement) | 4. Securities Owned and Securities Sold, but not yet Purchased (and Fair Value Measurement) Securities owned and securities sold, but not yet purchased are measured at fair value. The fair value of securities is defined as the price that would be received to sell an asset or paid to transfer a liability (i.e., “the exit price”) in an orderly transaction between market participants at the measurement date. ASC 820, Fair Value Measurements, establishes a hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available. Observable inputs are inputs that market participants would use in pricing the asset or liability developed based on market data obtained from independent sources. Unobservable inputs reflect assumptions that market participants would use in pricing the asset or liability developed based on the best information available in the circumstances. The hierarchy is broken down into three levels based on the transparency of inputs as follows:
Level 1 |  | – |  | Quoted prices for identical instruments in active markets.
Level 2 |  | – |  | Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations whose inputs are observable or whose significant value drivers are observable.
Level 3 |  | – |  | Instruments whose significant drivers are unobservable.
The availability of observable inputs can vary from product to product and is effected by a wide variety of factors, including, for example, the type of product, whether the product is new and not yet established in the marketplace, and other characteristics particular to the transaction. To the extent that valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment. Accordingly, the degree of judgment exercised by management in determining fair value is greatest for instruments categorized in Level 3. In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, for disclosure purposes, the level in the fair value hierarchy within which the fair value measurement in its entirety falls is determined based on the lowest level input that is significant to the fair value measurement in its entirety. Fair Valuation Methodology Cash and Cash Equivalents – These financial assets represent cash in banks or cash invested in highly liquid investments with original maturities less than 90 days. These investments are valued at par, which approximates fair value, and are considered Level 1 (See Note 3). Securities (Held-to-Maturity) – These securities are Federal agency debt instruments which are instruments that are generally traded in active, quoted and highly liquid markets and are therefore classified as Level 1 within the fair value hierarchy (See Note 5). Securities Owned/Sold But Not Yet Purchased – These securities consist of securities classified as trading and AFS, as follows:
|  | September 30, 2017 |  |  | December 31, 2016 |
Securities Owned |  |  |  |  |  |  |  |
Trading securities |  | $ | 410 |  |  | $ | 1,556 |
Available-for-sale securities |  |  | 68,002 |  |  |  | 57,351 |
Total |  | $ | 68,412 |  |  | $ | 58,907 |
Securities Sold, but not yet Purchased |  |  |  |  |  |  |  |
Trading securities |  | $ | — |  |  | $ | 1,248 |
Available-for-sale securities |  |  | — |  |  |  | — |
Total |  | $ | — |  |  | $ | 1,248 |
Trading securities are investments in ETFs. These instruments are generally traded in active, quoted and highly liquid markets and are therefore classified as Level 1 within the fair value hierarchy. AFS securities are investments in short-term investment grade corporate bonds and are classified as Level 2. Fair value is generally derived from observable bids for these Level 2 financial instruments. AFS Securities The following table summarizes unrealized gains, losses and fair value of the AFS securities:
|  | September 30, 2017 |  |  | December 31, 2016 |
Cost |  | $ | 68,637 |  |  | $ | 57,615 |
Gross unrealized gains in other comprehensive income |  |  | — |  |  |  | — |
Gross unrealized losses in other comprehensive income |  |  | (635 | ) |  |  | (264 | )
Fair value |  | $ | 68,002 |  |  | $ | 57,351 |
All the Company’s AFS securities are due within one year. The Company assesses the AFS securities for other-than-temporary impairment on a quarterly basis. No AFS securities were determined to be other-than-temporarily impaired at September 30, 2017 or December 31, 2016. During the three and nine months ended September 30, 2017, the Company received $19,003 and $65,067, respectively, of proceeds from the sale and maturity of available-for-sale securities and recognized gross realized losses of $277 and $687, respectively. These losses have been reclassified out of accumulated other comprehensive income and into other income in the Consolidated Statements of Operations. Interests Held in Tradeworx, Inc. On June 20, 2017, the Company was issued newly authorized preferred stock of Tradeworx, Inc. (“Tradeworx”) and a warrant to purchase additional preferred stock in connection with the resolution of a dispute related to the Company’s ownership stake in Tradeworx. The fair value of the preferred stock was $6,909 and is included in Investments on the Consolidated Balance Sheets (See Note 6). The fair value of the warrant was determined to be insignificant. The fair value of these interests held were derived from an enterprise valuation of Tradeworx prepared as of April 30, 2017. The Tradeworx enterprise valuation was determined through a combination of a market approach (Guideline Public Company Method) and income approach (discounted cash flow analyses) applied to its business lines. These approaches are predominantly based on unobservable inputs and therefore the valuation of these interests held are classified as Level 3. The table below presents the ranges and weighted averages of significant unobservable inputs used in these approaches to determine the enterprise value of Tradeworx.
Market Approach(1) |  | Range (Weighted Average)
Revenue multiple |  | 0.9x
Income Approach(1) |  | Range (Weighted Average)
Weighted average cost of capital (“WACC”) |  | 11.5% – 14.5% (12.6%)
(1) | The approach and inputs selected varied, based upon the Tradeworx business line being valued.
An increase in the revenue multiple would result in a higher enterprise value, whereas, an increase in the WACC would reduce fair value.

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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/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 820 -URI http://asc.fasb.org/topic&trid=2155941 + Details
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