Financial instruments (Tables)

3 Months Ended

Mar. 31, 2013

Securities Owned and Securities Sold, But Not Yet Purchased at Fair Value

Securities Owned and Securities Sold, But Not Yet Purchased at Fair Value


	March 31, 2013				December 31, 2012
(expressed in thousands of dollars)	Owned		Sold		Owned		Sold
U.S. Government, agency & sovereign obligations	$	612,310	$	12,320	$	525,255	$	131,930
Corporate debt and other obligations		20,577		6,811		14,428		1,858
Mortgage and other asset-backed securities		3,385		25		2,920		18
Municipal obligations		61,551		556		59,010		467
Convertible bonds		43,871		8,819		49,130		8,868
Corporate equities		42,091		34,401		43,708		29,884
Other		64,544		114		65,291		425

Total	$	848,329	$	63,046	$	759,742	$	173,450

Quantitative Information about Level 3 Fair Value Measurements

Additional information regarding the valuation technique and inputs used is as follows:

(expressed in thousands of dollars)

Quantitative Information about Level 3 Fair Value Measurements at March 31, 2013

Product

Principal

Valuation
Adjustment

Fair Value

Valuation Technique

Unobservable
Input

Range

Auction Rate Securities⁽¹⁾

117,541

7,882

109,659

Discounted Cash Flow

Discount Rate

0.85% to 2.64%

Duration

5 to 8 Years

Current Yield⁽²⁾

0.20% to 1.33%

(1)	Includes ARS owned by the Company of $78.2 million included in the condensed consolidated balance sheet at March 31, 2013 as well as additional commitments to purchase ARS from clients of $39.3 million which is disclosed in the notes to the condensed consolidated financial statements.

(2)	Based on current auctions in comparable securities that have not failed.

Investments in Company-Sponsored Funds

The following table provides information about the Company’s investments in Company-sponsored funds at March 31, 2013:


(expressed in thousands of dollars)	Fair Value		Unfunded Commitments		Redemption Frequency	Redemption Notice Period
Hedge funds (1)	$	623	$	—	Quarterly - Annually	30 - 120 Days
Private equity funds (2)		3,771		927	N/A	N/A
Distressed opportunities investment trust (3)		7,525		—	N/A	N/A

	$	11,919	$	927

(1)	Includes investments in hedge funds and hedge fund of funds that pursue long/short, event-driven, and activist strategies.

(2)	Includes private equity funds and private equity fund of funds with a focus on diversified portfolios, real estate and global natural resources.

(3)	Special purpose vehicle that holds the interest in securities formerly held by one of the Company’s funds which utilized Lehman Brothers International (Europe) as a prime broker.

Assets and Liabilities Measured at Fair Value on Recurring Basis

The Company’s assets and liabilities, recorded at fair value on a recurring basis as of March 31, 2013 and December 31, 2012, have been categorized based upon the above fair value hierarchy as follows:

Assets and liabilities measured at fair value on a recurring basis as of March 31, 2013


	Fair Value Measurements at March 31, 2013
(expressed in thousands of dollars)	Level 1		Level 2		Level 3		Total
Assets
Cash equivalents	$	50,909	$	—	$	—	$	50,909
Securities segregated for regulatory and other purposes		17,092		—		—		17,092
Deposits with clearing organizations		3,499		—		—		3,499
Securities owned
U.S Treasury securities		571,923		—		—		571,923
U.S. Agency securities		10,859		28,725		—		39,584
Sovereign obligations		—		803		—		803
Corporate debt and other obligations		2,574		18,003		—		20,577
Mortgage and other asset-backed securities		—		3,333		52		3,385
Municipal obligations		—		51,248		10,303		61,551
Convertible bonds		—		43,871		—		43,871
Corporate equities		30,333		11,758		—		42,091
Other		2,055		—		62,489		64,544

Securities owned, at fair value		617,744		157,741		72,844		848,329
Investments ⁽¹⁾		936		41,822		12,779		55,537
TBAs		—		3,111		—		3,111

Total	$	690,180	$	202,674	$	85,623	$	978,477

Liabilities
Securities sold, but not yet purchased
U.S Treasury securities	$	12,290	$	—	$	—	$	12,290
U.S. Agency securities		—		30		—		30
Corporate debt and other obligations		—		6,811		—		6,811
Mortgage and other asset-backed securities		—		25		—		25
Municipal obligations		—		556		—		556
Convertible bonds		—		8,819		—		8,819
Corporate equities		17,852		16,549		—		34,401
Other		14		—		100		114

Securities sold, but not yet purchased at fair value		30,156		32,790		100		63,046
Investments		270		—		—		270
Derivative contracts		360		71		2,094		2,525
TBAs		—		281		—		281

Total	$	30,786	$	33,142	$	2,194	$	66,122

(1)	Included in other assets on the condensed consolidated balance sheet.

Assets and liabilities measured at fair value on a recurring basis as of December 31, 2012


	Fair Value Measurements at December 31, 2012
(expressed in thousands of dollars)	Level 1		Level 2		Level 3		Total
Assets
Cash equivalents	$	58,945	$	—	$	—	$	58,945
Securities segregated for regulatory and other purposes		11,499		—		—		11,499
Deposits with clearing organizations		9,095		—		—		9,095
Securities owned
U.S Treasury securities		497,546		—		—		497,546
U.S. Agency securities		—		27,690		—		27,690
Sovereign obligations		—		19		—		19
Corporate debt and other obligations		2,459		11,969		—		14,428
Mortgage and other asset-backed securities		—		2,880		40		2,920
Municipal obligations		—		49,616		9,394		59,010
Convertible bonds		—		49,130		—		49,130
Corporate equities		31,958		11,750		—		43,708
Other		2,328		—		62,963		65,291

Securities owned, at fair value		534,291		153,054		72,397		759,742
Investments ⁽¹⁾		10,477		37,088		12,954		60,519
TBAs		—		3,188		—		3,188

	$	624,307	$	193,330	$	85,351	$	902,988

Liabilities
Securities sold, but not yet purchased
U.S Treasury securities	$	131,899	$	—	$	—	$	131,899
U.S. Agency securities		—		31		—		31
Corporate debt and other obligations		—		1,858		—		1,858
Mortgage and other asset-backed securities		—		18		—		18
Municipal obligations		—		467		—		467
Convertible bonds		—		8,868		—		8,868
Corporate equities		20,946		8,938		—		29,884
Other		325		—		100		425

Securities sold, but not yet purchased at fair value		153,170		20,180		100		173,450
Investments		258		—		—		258
Derivative contracts		286		124		2,647		3,057
TBAs		—		175		—		175

	$	153,714	$	20,479	$	2,747	$	176,940

(1)	Included in other assets on the condensed consolidated balance sheet.

Changes in Level 3 Assets and Liabilities Measured at Fair Value on Recurring Basis

The following tables present changes in Level 3 assets and liabilities measured at fair value on a recurring basis for the three months ended March 31, 2013 and 2012:


	Level 3 Assets and Liabilities
	For the Three Months Ended March 31, 2013
(expressed in thousands of dollars)	Beginning Balance		Total Realized and Unrealized Gains (Losses) ⁽⁴⁾⁽⁵⁾			Purchases and Issuances		Sales and Settlements			Transfers In (Out)		Ending Balance
Assets
Mortgage and other asset-backed securities ⁽¹⁾	$	40	$	7		$	23	$	(18	)	$	—	$	52
Municipals		9,394		(141	)		1,200		(150	)		—		10,303
Other ⁽²⁾		62,963		(549	)		3,050		(2,975	)		—		62,489
Investments ⁽³⁾		12,954		329			—		(504	)		—		12,779
Liabilities
Mortgage and other asset-backed securities ⁽¹⁾		—		—			—		—			—		—
Other ⁽²⁾		100		—			—		—			—		100
Derivative contracts		2,647		553			—		—			—		2,094

(1)	Represents private placements of non-agency collateralized mortgage obligations.

(2)	Represents auction rate securities that failed in the auction rate market.

(3)	Primarily represents general partner ownership interests in hedge funds and private equity funds sponsored by the Company.

(4)	Included in principal transactions on the condensed consolidated statement of operations, except for investments which are included in other income on the condensed consolidated statement of operations.

(5)	Unrealized gains (losses) are attributable to assets or liabilities that are still held at the reporting date.


	Level 3 Assets and Liabilities
	For the Three Months Ended March 31, 2012
(expressed in thousands of dollars)	Beginning Balance		Total Realized and Unrealized Gains (Losses) ⁽⁴⁾⁽⁵⁾			Purchases and Issuances			Sales and Settlements			Transfers In (Out)		Ending Balance
Assets
Mortgage and other asset-backed securities ⁽¹⁾	$	16	$	17		$	80		$	(15	)	$	—	$	98
Municipals		3,562		(1,078	)		9,305			—			—		11,789
Other ⁽²⁾		65,001		(1,499	)		10,300			(6,971	)		—		66,831
Investments ⁽³⁾		12,482		515			124			—			11		13,132
Liabilities
Mortgage and other asset-backed securities ⁽¹⁾		—		—			—			—			—		—
Other ⁽²⁾		50		—			(50	)		—			—		—
Derivative contracts		2,347		—			1,560			—			—		3,907

(1)	Represents private placements of non-agency collateralized mortgage obligations.

(2)	Represents auction rate securities that failed in the auction rate market.

(3)	Primarily represents general partner ownership interests in hedge funds and private equity funds sponsored by the Company.

(4)	Included in principal transactions on the condensed consolidated statement of operations, except for investments which are included in other income on the condensed consolidated statement of operations.

(5)	Unrealized gains (losses) are attributable to assets or liabilities that are still held at the reporting date.

Assets and Liabilities Not Measured at Fair Value on Recurring Basis

Assets and liabilities not measured at fair value on a recurring basis as of March 31, 2013


					Fair Value Measurement: Assets
	As of March 31, 2013				As of March 31, 2013
(expressed in thousands of dollars)	Carrying Value		Fair Value		Level 1		Level 2		Level 3		Total
Cash	$	47,869	$	47,869	$	47,869	$	—	$	—	$	47,869
Cash and securities segregated for regulatory and other purposes		20,072		20,072		20,072		—		—		20,072
Deposits with clearing organization		21,077		21,077		21,077		—		—		21,077
Receivable from brokers and clearing organizations
Deposits paid for securities borrowed		186,361		186,361		—		186,361		—		186,361
Receivables from brokers		45,507		45,507		—		45,507		—		45,507
Securities failed to deliver		30,191		30,191		—		30,191		—		30,191
Omnibus accounts		28,358		28,358		—		28,358		—		28,358
Other		538		538		—		538		—		538

		290,955		290,955		—		290,955		—		290,955
Receivable from customers		881,514		881,514		—		881,514		—		881,514
Notes receivable		45,030		45,030		—		—		45,030		45,030
Other assets
Mortgage servicing rights (MSRs)		27,187		34,350		—		—		34,350		34,350
Mortgage receivable ⁽¹⁾		25,685		25,685		—		25,685		—		25,685
Loan receivable ⁽²⁾		7,126		7,126		—		—		7,126		7,126
Escrow deposit ⁽³⁾		25,000		25,000		25,000		—		—		25,000

(1)	Mortgage receivable balance represents loan amounts outstanding after funding but prior to GNMA securitization. Amount funded by warehouse facility (warehouse payable) which is included in Accounts payable and other liabilities on condensed consolidated balance sheet (see note 4 below).

Residual amount between asset and liability is funded with internally generated funds.

(2)	Loan receivable represents outstanding loan purchased out of GNMA pool on property that is in default. Amount funded by third- party and is included in Accounts payable and other liabilities on condensed consolidated balance sheet (see note 5 below).

(3)	Represent escrow monies deposited with commercial bank. Offsets with payable to third party in Accounts payable and other liabilities on condensed consolidated balance sheet (see note 6 below).


					Fair Value Measurement: Liabilities
	As of March 31, 2013				As of March 31, 2013
(expressed in thousands of dollars)	Carrying Value		Fair Value		Level 1		Level 2		Level 3		Total
Drafts payable	$	44,927	$	44,927	$	44,927	$	—	$	—	$	44,927
Bank call loans		204,000		204,000		204,000		—		—		204,000
Payables to brokers and clearing organizations												—
Deposits received for securities loaned		175,601		175,601		—		175,601		—		175,601
Securities failed to receive		32,061		32,061		—		32,061		—		32,061
Clearing organizations and other		7,950		7,950		—		7,950		—		7,950

		215,612		215,612		—		215,612		—		215,612
Payables to customers		607,034		607,034		—		607,034		—		607,034
Securities sold under agreements to repurchase		544,136		544,136		—		544,136		—		544,136
Accounts payable and other liabilities												—
Warehouse payable ⁽⁴⁾		24,374		24,374		—		24,374		—		24,374
Loan payable ⁽⁵⁾		7,126		7,126		—		—		7,126		7,126
Payable to third party ⁽⁶⁾		25,000		25,000		25,000		—		—		25,000
Senior secured note		195,000		209,742		—		209,742		—		209,742

(4)	Warehouse payable represents loans outstanding under warehouse facility, provided by commercial bank, prior to GNMA securitization. Used to fund Mortgage receivable in Other assets on condensed consolidated balance sheet (see note 1 above).

(5)	Loan payable represents amount funded by third-party for loan purchased out of GNMA pool on property that is in default. Offsets with Loan receivable in Other assets on condensed consolidated balance sheet (see note 2 above).

(6)	Offsets with Escrow deposit in Other assets on condensed consolidated balance sheet (see note 3 above).

Notional and Fair Values of TBAs

The following table summarizes the notional and fair values of the TBAs as of March 31, 2013 and December 31, 2012:


	March 31, 2013				December 31, 2012
	Notional				Notional
(expressed in thousands of dollars)	Amount		Fair Value		Amount		Fair Value
Sale of TBAs ⁽¹⁾	$	345,168	$	3,111	$	449,065	$	3,188
Purchase of TBAs	$	44,749	$	281	$	117,573	$	175
Funding Commitments		264,035				304,390

	$	308,784			$	421,963

(1)

TBAs are used to offset exposures related to commitments to provide funding for Federal Housing Administration (“FHA”) loans at OMHHF. At March 31, 2013, the loan commitments balance was $264.0 million ($304.4 million at December 31, 2012). In addition, at March 31, 2013, OMHHF had a loan receivable balance (included in other assets in the condensed consolidated balance sheet) of $25.7 million ($22.9 million at December 31, 2012) which relates to prior loan commitments that have been funded but have not yet been securitized. The “when issued” securitizations of these loans have been sold to market counter-parties.

Notional Amounts and Fair Values of Derivatives by Product

The notional amounts and fair values of the Company’s derivatives at March 31, 2013 and December 31, 2012 by product were as follows:


	Fair Value of Derivative Instruments at March 31, 2013
(expressed in thousands of dollars)	Description	Notional		Fair Value
Liabilities
Derivatives not designated as hedging instruments ⁽¹⁾
Commodity contracts	U.S. Treasury Futures ⁽²⁾	$	57,600	$	360
	Federal Funds Futures ⁽²⁾		7,330,000		71
Other contracts	Auction rate securities purchase commitments ⁽³⁾		39,301		2,094

		$	7,426,901	$	2,525

(1)	See “Fair Value of Derivative Instruments” above for description of derivative financial instruments.

(2)	Included in payable to brokers and clearing organizations on the condensed consolidated balance sheet.

(3)	Included in other liabilities on the condensed consolidated balance sheet.


	Fair Value of Derivative Instruments at December 31, 2012
(expressed in thousands of dollars)	Description	Notional		Fair Value
Liabilities
Derivatives not designated as hedging instruments ⁽¹⁾
Commodity contracts	U.S. Treasury Futures ⁽²⁾	$	56,000	$	286
	Federal Funds Futures ⁽²⁾		6,070,000		120
	Euro Dollars Futures ⁽²⁾		15,000		4
Other contracts	Auction rate securities purchase commitments ⁽³⁾		38,343		2,647

		$	6,179,343	$	3,057

(1)	See “Fair Value of Derivative Instruments” above for description of derivative financial instruments.

(2)	Included in payable to brokers and clearing organizations on the condensed consolidated balance sheet.

(3)	Included in other liabilities on the condensed consolidated balance sheet.

Fair Value Amounts of Derivative Instruments and Their Effect on Statement of Operations

The following table presents the location and fair value amounts of the Company’s derivative instruments and their effect on the condensed consolidated statement of operations for the three months ended March 31, 2013 and 2012:

The Effect of Derivative Instruments on the Statement of

Operations for the Three Months Ended March 31, 2013

(expressed in thousands of dollars)

Recognized in Income on Derivatives (pre-tax)

Reclassified from
Accumulated Other
Comprehensive
Income into Income
Effective Portion (1)
(after-tax)

Types

Description

Location

Gain (Loss)

Location

Gain (Loss)

Commodity contracts

U.S. Treasury Futures

Principal transaction revenue

(119

)

None

—

Federal Funds Futures

Principal transaction revenue

None

—

Other contracts

Auction rate securities purchase Commitment

Principal transaction revenue

1,794

None

—

1,730

—

(1)	There is no ineffective portion included in income for the period ended March 31, 2013.

The Effect of Derivative Instruments on the Statement of

Operations for the Three Months Ended March 31, 2012

(expressed in thousands of dollars)

Recognized in Income on Derivatives
(pre-tax)

Reclassified from
Accumulated Other
Comprehensive
Income into Income
Effective Portion (1)
(after-tax)

Types

Description

Location

Gain (Loss)

Location

Gain (Loss)

Interest rate contracts

Caps (2)

Interest expense

(11

)

None

—

Commodity contracts

U.S. Treasury Futures

Principal transaction revenue

257

None

—

Federal Funds Futures

Principal transaction revenue

188

None

—

Other contracts

Auction rate securities purchase Commitment

Principal transaction revenue

(1,560

)

None

—

(1,126

)

—

(1)	There is no ineffective portion included in income for the period ended March 31, 2012.

(2)

As noted above in “Cash flow hedges used for asset and liability management”, interest rate caps are used to hedge interest rate risk associated with the Subordinated Note. With the repayment of the Subordinated Note in the second quarter of 2011, this cap is no longer designated as a cash flow hedge. The cap expired worthless on December 31, 2012.

Schedule of Gross Amounts and Offsetting Amounts of Reverse Repurchase Agreements, Repurchase Agreements, Securities Borrowed and Securities Lending Transactions

The following tables present the gross amounts and the offsetting amounts of reverse repurchase agreements, repurchase agreements, securities borrowed and securities loaned transactions at March 31, 2013 and December 31, 2012:


As of March 31, 2013

	Gross		Gross Amounts Offset in the		Net Amounts of Assets		Gross Amounts Not Offset on the Balance Sheet
(expressed in thousands of dollars)	Amounts of Recognized Assets		Statement of Financial Position		Presented on the Balance Sheet		Financial Instruments			Cash Collateral Received		Net Amount
Reverse repurchase agreements	$	3,862,697	$	3,862,697	$	—	$	—		$	—	$	—
Securities borrowed ⁽¹⁾		186,361		—		186,361		(186,361	)		—		—

Total	$	4,049,058	$	3,862,697	$	186,361	$	(186,361)		$	—	$	—

(1)	Included in receivable from brokers and clearing organizations on the condensed consolidated balance sheet.


	Gross		Gross Amounts Offset in the		Net Amounts of Liabilities		Gross Amounts Not Offset on the Balance Sheet
	Amounts of Recognized Liabilities		Statement of Financial Position		Presented on the Balance Sheet		Financial Instruments			Cash Collateral Pledged		Net Amount
Repurchase agreements	$	4,406,833	$	3,862,697	$	544,136	$	(544,136	)	$	—	$	—
Securities loaned ⁽²⁾		175,601		—		175,601		(175,601	)		—		—

Total	$	4,582,434	$	3,862,697	$	719,737	$	(719,737	)	$	—	$	—

(2)	Included in payable to brokers and clearing organizations on the condensed consolidated balance sheet.

As of December 31, 2012


	Gross		Gross Amounts Offset in the		Net Amounts of Assets		Gross Amounts Not Offset on the Balance Sheet
(expressed in thousands of dollars)	Amounts of Recognized Assets		Statement of Financial Position		Presented on the Balance Sheet		Financial Instruments			Cash Collateral Received		Net Amount
Reverse repurchase agreements	$	1,160,239	$	1,160,239	$	—	$	—		$	—	$	—
Securities borrowed ⁽¹⁾		365,642		—		365,642		(365,642	)		—		—

Total	$	1,525,881	$	1,160,239	$	365,642	$	(365,642)		$	—	$	—

(1)	Included in receivable from brokers and clearing organizations on the condensed consolidated balance sheet.


	Gross		Gross Amounts Offset in the		Net Amounts of Liabilities		Gross Amounts Not Offset on the Balance Sheet
	Amounts of Recognized Liabilities		Statement of Financial Position		Presented on the Balance Sheet		Financial Instruments			Cash Collateral Pledged		Net Amount
Repurchase agreements	$	1,552,630		1,160,239		392,391		(392,391	)		—	$	—
Securities loaned ⁽²⁾		190,387		—		190,387		(190,387	)		—		—

Total	$	1,743,017	$	1,160,239	$	582,778	$	(582,778	)	$	—	$	—

(2)	Included in payable to brokers and clearing organizations on the condensed consolidated balance sheet.

Variable Interest Entities

The following tables set forth the total VIE assets, the carrying value of the subsidiaries’ variable interests, and the Company’s maximum exposure to loss in Company-sponsored non-consolidated VIEs in which the Company holds variable interests and other non-consolidated VIEs in which the Company holds variable interests at March 31, 2013 and December 31, 2012:


	March 31, 2013
									Maximum
									Exposure
			Carrying Value of the						to Loss in
	Total		Company’s Variable Interest				Capital		Non-consolidated
(expressed in thousands of dollars)	VIE Assets (1)		Assets (2)		Liabilities		Commitments		VIEs
Hedge funds	$	1,879,864	$	320	$	—	$	—	$	320
Private equity funds		130,128		32		—		8		40

Total	$	2,009,992	$	352	$	—	$	8	$	360

(1)	Represents the total assets of the VIEs and does not represent the Company’s interests in the VIEs.

(2)	Represents the Company’s interests in the VIEs and is included in other assets on the condensed consolidated balance sheet.


	December 31, 2012
									Maximum
									Exposure
			Carrying Value of the						to Loss in
	Total		Company’s Variable Interest				Capital		Non-consolidated
(expressed in thousands of dollars)	VIE Assets (1)		Assets (2)		Liabilities		Commitments		VIEs
Hedge funds	$	1,868,178	$	372	$	—	$	—	$	372
Private equity funds		171,169		32		—		8		40

Total	$	2,039,347	$	404	$	—	$	8	$	412

(1)	Represents the total assets of the VIEs and does not represent the Company’s interests in the VIEs.

(2)	Represents the Company’s interests in the VIEs and is included in other assets on the condensed consolidated balance sheet.