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Collateralized Transactions | 9 Months Ended
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Sep. 30, 2018
Brokers and Dealers [Abstract] |
Collateralized Transactions | Collateralized transactions The Company enters into collateralized borrowing and lending transactions in order to meet customers' needs and earn interest rate spreads, obtain securities for settlement and finance trading inventory positions. Under these transactions, the Company either receives or provides collateral, including U.S. Government and Agency, asset-backed, corporate debt, equity, and non-U.S. Government and Agency securities. The Company obtains short-term borrowings primarily through bank call loans. Bank call loans are generally payable on demand and bear interest at various rates but not exceeding the broker call rate. As of September 30, 2018, bank call loans were $3.0 million ($118.3 million as of December 31, 2017). As of September 30, 2018, such loans were collateralized by firm and/or customer securities with market values of approximately $3.3 million and $311.8 million, respectively, with commercial banks. As of September 30, 2018, the Company had approximately $1.1 billion of customer securities under customer margin loans that are available to be pledged, of which the Company has re-pledged approximately $169.9 million under securities loan agreements. As of September 30, 2018, the Company had pledged $287.0 million of customer securities directly with the Options Clearing Corporation to secure obligations and margin requirements under option contracts written by customers. As of September 30, 2018, the Company had no outstanding letters of credit. The Company enters into reverse repurchase agreements, repurchase agreements, securities borrowed and securities loaned transactions to, among other things, acquire securities to cover short positions and settle other securities obligations, to accommodate customers' needs and to finance the Company's inventory positions. Except as described below, repurchase and reverse repurchase agreements, principally involving U.S. Government and Agency securities, are carried at amounts at which the securities subsequently will be resold or reacquired as specified in the respective agreements and include accrued interest. Repurchase agreements and reverse repurchase agreements are presented on a net-by-counterparty basis, when the repurchase agreements and reverse repurchase agreements are executed with the same counterparty, have the same explicit settlement date, are executed in accordance with a master netting arrangement, the securities underlying the repurchase agreements and reverse repurchase agreements exist in "book entry" form and certain other requirements are met. The following table presents a disaggregation of the gross obligation by the class of collateral pledged and the remaining contractual maturity of the repurchase agreements and securities loaned transactions as of September 30, 2018:
(Expressed in thousands) |
| Overnight and Open
Repurchase agreements: |
U.S. Government and Agency securities | $ | 705,491 |
Securities loaned: |
Equity securities | 197,332 |
Gross amount of recognized liabilities for repurchase agreements and securities loaned | $ | 902,823 |
The following tables present the gross amounts and the offsetting amounts of reverse repurchase agreements, repurchase agreements, securities borrowed and securities loaned transactions as of September 30, 2018 and December 31, 2017:
As of September 30, 2018
(Expressed in thousands) |  |  |  |  |  |  |  |  |  |  |
|  |  |  |  |  |  | Gross Amounts Not Offset on the Balance Sheet |  |
| Gross Amounts of Recognized Assets |  | Gross Amounts Offset on the Balance Sheet |  | Net Amounts of Assets Presented on the Balance Sheet |  | Financial Instruments |  | Cash Collateral Received |  | Net Amount
Reverse repurchase agreements | $ | 100,983 |  |  | $ | (99,481 | ) |  | $ | 1,502 |  |  | $ | (1,495 | ) |  | $ | — |  |  | $ | 7 |
Securities borrowed (1) | 114,795 |  |  | — |  |  | 114,795 |  |  | (110,123 | ) |  | — |  |  | 4,672 |
Total | $ | 215,778 |  |  | $ | (99,481 | ) |  | $ | 116,297 |  |  | $ | (111,618 | ) |  | $ | — |  |  | $ | 4,679 |
(1) | Included in receivable from brokers, dealers and clearing organizations on the condensed consolidated balance sheet.
|  |  |  |  |  |  | Gross Amounts Not Offset on the Balance Sheet |  |
| Gross Amounts of Recognized Liabilities |  | Gross Amounts Offset on the Balance Sheet |  | Net Amounts of Liabilities Presented on the Balance Sheet |  | Financial Instruments |  | Cash Collateral Pledged |  | Net Amount
Repurchase agreements | $ | 705,491 |  |  | $ | (99,481 | ) |  | $ | 606,010 |  |  | $ | (603,961 | ) |  | $ | — |  |  | $ | 2,049 |
Securities loaned (2) | 197,332 |  |  | — |  |  | 197,332 |  |  | (189,961 | ) |  | — |  |  | 7,371 |
Total | $ | 902,823 |  |  | $ | (99,481 | ) |  | $ | 803,342 |  |  | $ | (793,922 | ) |  | $ | — |  |  | $ | 9,420 |
(2) | Included in payable to brokers, dealers and clearing organizations on the condensed consolidated balance sheet.
As of December 31, 2017
(Expressed in thousands) |  |  |  |  |  |  |  |  |  |  |
|  |  |  |  |  |  | Gross Amounts Not Offset on the Balance Sheet |  |
| Gross Amounts of Recognized Assets |  | Gross Amounts Offset on the Balance Sheet |  | Net Amounts of Assets Presented on the Balance Sheet |  | Financial Instruments |  | Cash Collateral Received |  | Net Amount
Reverse repurchase agreements | $ | 200,712 |  |  | $ | (200,054 | ) |  | $ | 658 |  |  | $ | — |  |  | $ | — |  |  | $ | 658 |
Securities borrowed (1) | 132,368 |  |  | — |  |  | 132,368 |  |  | (128,575 | ) |  | — |  |  | 3,793 |
Total | $ | 333,080 |  |  | $ | (200,054 | ) |  | $ | 133,026 |  |  | $ | (128,575 | ) |  | $ | — |  |  | $ | 4,451 |
(1) | Included in receivable from brokers, dealers and clearing organizations on the condensed consolidated balance sheet.
|  |  |  |  |  |  | Gross Amounts Not Offset on the Balance Sheet |  |
| Gross Amounts of Recognized Liabilities |  | Gross Amounts Offset on the Balance Sheet |  | Net Amounts of Liabilities Presented on the Balance Sheet |  | Financial Instruments |  | Cash Collateral Pledged |  | Net Amount
Repurchase agreements | $ | 786,532 |  |  | $ | (200,054 | ) |  | $ | 586,478 |  |  | $ | (585,289 | ) |  | $ | — |  |  | $ | 1,189 |
Securities loaned (2) | 180,270 |  |  | — |  |  | 180,270 |  |  | (170,176 | ) |  | — |  |  | 10,094 |
Total | $ | 966,802 |  |  | $ | (200,054 | ) |  | $ | 766,748 |  |  | $ | (755,465 | ) |  | $ | — |  |  | $ | 11,283 |
(2) | Included in payable to brokers, dealers and clearing organizations on the condensed consolidated balance sheet.
Certain of the Company's repurchase agreements and reverse repurchase agreements are carried at fair value as a result of the Company's fair value option election. The Company elected the fair value option for those repurchase agreements and reverse repurchase agreements that do not settle overnight or have an open settlement date. As of September 30, 2018, the Company did not have any repurchase agreements and reverse repurchase agreements that do not settle overnight or have an open settlement date. The Company receives collateral in connection with securities borrowed and reverse repurchase agreement transactions and customer margin loans. Under many agreements, the Company is permitted to sell or re-pledge the securities received (e.g., use the securities to enter into securities lending transactions, or deliver to counterparties to cover short positions). As of September 30, 2018, the fair value of securities received as collateral under securities borrowed transactions and reverse repurchase agreements was $110.7 million ($127.2 million as of December 31, 2017) and $100.6 million ($221.6 million as of December 31, 2017), respectively, of which the Company has sold and re-pledged approximately $18.1 million ($30.9 million as of December 31, 2017) under securities loaned transactions and $100.6 million under repurchase agreements ($221.6 million as of December 31, 2017). The Company pledges certain of its securities owned for securities lending and repurchase agreements and to collateralize bank call loan transactions. The carrying value of pledged securities owned that can be sold or re-pledged by the counterparty was $738.8 million, as presented on the face of the condensed consolidated balance sheet as of September 30, 2018 ($655.7 million as of December 31, 2017). The carrying value of securities owned by the Company that have been loaned or pledged to counterparties where those counterparties do not have the right to sell or re-pledge the collateral was $3.3 million as of September 30, 2018 ($97.2 million as of December 31, 2017). The Company manages credit exposure arising from repurchase and reverse repurchase agreements by, in appropriate circumstances, entering into master netting agreements and collateral arrangements with counterparties that provide the Company, in the event of a customer default, the right to liquidate securities and the right to offset a counterparty's rights and obligations. The Company manages market risk of repurchase agreements and securities loaned by monitoring the market value of collateral held and the market value of securities receivable from others. It is the Company's policy to request and obtain additional collateral when exposure to loss exists. In the event the counterparty is unable to meet its contractual obligation to return the securities, the Company may be exposed to off-balance sheet risk of acquiring securities at prevailing market prices. Credit Concentrations Credit concentrations may arise from trading, investing, underwriting and financing activities and may be impacted by changes in economic, industry or political factors. In the normal course of business, the Company may be exposed to credit risk in the event customers, counterparties including other brokers and dealers, issuers, banks, depositories or clearing organizations are unable to fulfill their contractual obligations. The Company seeks to mitigate these risks by actively monitoring exposures and obtaining collateral as deemed appropriate. Included in receivable from brokers, dealers and clearing organizations as of September 30, 2018 are receivables from five major U.S. broker-dealers totaling approximately $84.3 million. The Company is obligated to settle transactions with brokers and other financial institutions even if its clients fail to meet their obligations to the Company. Clients are required to complete their transactions on the settlement date, generally one to two business days after the trade date. If clients do not fulfill their contractual obligations, the Company may incur losses. The Company has clearing/participating arrangements with the National Securities Clearing Corporation, the Fixed Income Clearing Corporation ("FICC"), R.J. O'Brien & Associates (commodities transactions), Mortgage-Backed Securities Division (a division of FICC) and others. With respect to its business in reverse repurchase and repurchase agreements, substantially all open contracts as of September 30, 2018 are with the FICC. In addition, the Company clears its non-U.S. international equities business carried on by Oppenheimer Europe Ltd. through Global Prime Partners, Ltd. The clearing organizations have the right to charge the Company for losses that result from a client's failure to fulfill its contractual obligations. Accordingly, the Company has credit exposures with these clearing brokers. The clearing brokers can re-hypothecate the securities held on behalf of the Company. As the right to charge the Company has no maximum amount and applies to all trades executed through the clearing brokers, the Company believes there is no maximum amount assignable to this right. As of September 30, 2018, the Company had recorded no liabilities with regard to this right. The Company's policy is to monitor the credit standing of the clearing brokers and banks with which it conducts business.

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