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Revenue Recognition | 3 Months Ended
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Mar. 31, 2022
Revenue from Contract with Customer [Abstract] |
Revenue Recognition | 15. Revenue Recognition Overview of Revenue The primary sources of revenue for the Company are as follows: Commissions and Fees The Company earns commission revenue for executing trades for clients in individual equities, options, insurance products, futures, fixed income securities, as well as certain third-party mutual funds and ETFs. Commission revenue associated with combined trade execution and clearing services, as well as trade execution services on a standalone basis, is recognized at a point in time on the trade date when the performance obligation is satisfied. The performance obligation is satisfied on the trade date because that is when the underlying financial instrument or purchaser is identified, the pricing is agreed upon, and the risks and rewards of ownership have been transferred to / from the customer. Principal Transactions and Proprietary Trading Principal transactions and proprietary trading primarily represent two business lines. The first business line is riskless transactions in which the Company, after executing a solicited order, buys or sells securities as principal and at the same time buys or sells the securities with a markup or markdown to satisfy the order. The second business line is entering into transactions where proprietary U.S. government securities and other securities are traded by the Company. Principal transactions and proprietary trading are recognized at a point in time on the trade date when the performance obligation is satisfied. The performance obligation is satisfied on the trade date because that is when the underlying financial instrument or purchaser is identified, the pricing is agreed upon, and the risks and rewards of ownership have been transferred to / from the customer. For the three months ended March 31, 2022, the Company invested in a portfolio of U.S. government securities, which is primarily within the line item cash and securities segregated for regulatory purposes on the statements of financial condition. The following table represents detail related to principal transactions and proprietary trading. Refer to the year-over-year comparisons within Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations within this Report for additional detail.
|  | Three Months Ended March 31, |
|  | 2022 |  |  | 2021 |  |  | (Year over Year Decrease) |
Principal transactions and proprietary trading |  |  |  |  |  |  |  |  |  |  |  |
Realized and unrealized gain on primarily riskless principal transactions |  | $ | 1,919,000 |  |  | $ | 4,254,000 |  |  | $ | (2,335,000 | )
Unrealized loss on portfolio of U.S. government securities |  |  | (2,186,000 | ) |  |  | (6,000 | ) |  |  | (2,180,000 | )
Total Principal transactions and proprietary trading |  | $ | (267,000 | ) |  | $ | 4,248,000 |  |  | $ | (4,515,000 | )
Market Making Market making revenue is generated from the buying and selling of securities. Market making transactions are recorded on a trade-date basis as the securities transactions occur. The performance obligation is satisfied on the trade date because that is when the underlying financial instrument or purchaser is identified, the pricing is agreed upon, and the risks and rewards of ownership have been transferred to / from the counterparty. Securities owned are recorded at fair market value at the end of the reporting period. -16- Stock Borrow / Stock Loan The Company borrows securities on behalf of retail clients to facilitate short trading, loans excess margin and fully-paid securities from client accounts, facilitates borrow and loan contracts for broker-dealer counterparties, and provides stock locate services to broker-dealer counterparties. The Company recognizes self-clearing revenues net of operating expenses related to stock borrow / stock loan. Stock borrow / stock loan also includes any revenues generated from the Company’s fully paid lending programs on a self-clearing or introducing basis. The Company does not utilize stock borrow / stock loan activities for the purpose of financing transactions. The performance obligation is satisfied on the contract date because that is when the underlying financial instrument or purchaser is identified, the pricing is agreed upon, and the risks and rewards of ownership have been transferred to / from the counterparty. For the three months ended March 31, 2022, stock borrow / stock loan revenue was $3,578,000 ($7,465,000 gross revenue less $3,887,000 expenses). For the three months ended March 31, 2021, stock borrow / stock loan revenue was $1,847,000 ($4,830,000 gross revenue minus $2,983,000 expenses). Advisory Fees The Company earns advisory fees associated with managing client assets. The performance obligation related to this revenue stream is satisfied over time; however, the advisory fees are variable as they are charged as a percentage of the client’s total asset value, which is determined at the end of the quarter. Interest, Marketing and Distribution Fees The Company earns interest from clients’ accounts, net of payments to clients’ accounts, and on the Company’s bank balances. Interest income also includes interest payouts from introducing relationships related to short interest, net of charges. The Company also earns margin interest which is the net interest charged to customers for holding financed margin positions. Marketing and distribution fees consist of 12b-1 fees which are trailing payments from money market funds. Interest, marketing and distribution fees are recorded as earned. Other Income Other income represents fees generated from consulting services to institutional partners, corporate services client fees, payment for order flow, and transactional fees generated from client accounts. Transactional fees are recorded concurrently with the related activity. Other income is recorded as earned. Categorization of Revenue The following table presents the Company’s major revenue categories and when each category is recognized:
|  | Three Months Ended March 31, |  |
Revenue Category |  | 2022 |  |  | 2021 |  |  | Timing of Recognition
Trading Execution and Clearing Services |  |  |  |  |  |  |  |
Commissions and fees |  | $ | 2,340,000 |  |  | $ | 7,008,000 |  |  | Recorded on trade date
Principal transactions and proprietary trading |  |  | (267,000 | ) |  |  | 4,248,000 |  |  | Recorded on trade date
Market making |  |  | 764,000 |  |  |  | 1,614,000 |  |  | Recorded on trade date
Stock borrow / stock loan |  |  | 3,578,000 |  |  |  | 1,847,000 |  |  | Recorded as earned
Advisory fees |  |  | 507,000 |  |  |  | 356,000 |  |  | Recorded as earned
Total Trading Execution and Clearing Services |  |  | 6,922,000 |  |  |  | 15,073,000 |  |  |
Other Income |  |  |  |  |  |  |  |  |  |
Interest, marketing and distribution fees |  |  |  |  |  |  |  |  |  |
Interest |  |  | 235,000 |  |  |  | 1,154,000 |  |  | Recorded as earned
Margin interest |  |  | 1,968,000 |  |  |  | 2,152,000 |  |  | Recorded as earned
12b-1 fees |  |  | 159,000 |  |  |  | 153,000 |  |  | Recorded as earned
Total Interest, marketing and distribution fees |  |  | 2,362,000 |  |  |  | 3,459,000 |  |  |
Other income |  |  | 1,060,000 |  |  |  | 392,000 |  |  | Recorded as earned
Total Revenue |  | $ | 10,344,000 |  |  | $ | 18,924,000 |  |  |
-17- The following table presents each revenue category and its related performance obligation:
Revenue Stream | Performance Obligation
Commissions and fees, Principal transactions and proprietary trading, Market making, Stock borrow / stock loan, Advisory fees | Provide financial services to customers and counterparties
Interest, marketing and distribution fees, Other income | n / a
Other Items For the periods presented, there were no costs capitalized related to obtaining or fulfilling a contract with a customer, and thus the Company has no balances for contract assets or contract liabilities. The Company concludes that its revenue streams have the same underlying economic factors, and as such, no disaggregation of revenue is required.

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- Definition The entire disclosure of revenue from contract with customer to transfer good or service and to transfer nonfinancial asset. Includes, but is not limited to, disaggregation of revenue, credit loss recognized from contract with customer, judgment and change in judgment related to contract with customer, and asset recognized from cost incurred to obtain or fulfill contract with customer. Excludes insurance and lease contracts. + References Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 606 -URI https://asc.fasb.org/topic&trid=49130388 Reference 2: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 606 -SubTopic 10 -Section 50 -Paragraph 10 -URI https://asc.fasb.org/extlink&oid=126920106&loc=SL49130551-203045 Reference 3: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 606 -SubTopic 10 -Section 50 -Paragraph 13 -Subparagraph (b)(2) -URI https://asc.fasb.org/extlink&oid=126920106&loc=SL49130556-203045 Reference 4: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 606 -SubTopic 10 -Section 50 -Paragraph 12 -Subparagraph (b) -URI https://asc.fasb.org/extlink&oid=126920106&loc=SL49130554-203045 Reference 5: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 606 -SubTopic 10 -Section 50 -Paragraph 9 -URI https://asc.fasb.org/extlink&oid=126920106&loc=SL49130550-203045 Reference 6: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 606 -SubTopic 10 -Section 50 -Paragraph 12 -Subparagraph (e) -URI https://asc.fasb.org/extlink&oid=126920106&loc=SL49130554-203045 Reference 7: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 606 -SubTopic 10 -Section 50 -Paragraph 12 -Subparagraph (a) -URI https://asc.fasb.org/extlink&oid=126920106&loc=SL49130554-203045 Reference 8: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 606 -SubTopic 10 -Section 50 -Paragraph 12 -Subparagraph (d) -URI https://asc.fasb.org/extlink&oid=126920106&loc=SL49130554-203045 Reference 9: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 606 -SubTopic 10 -Section 50 -Paragraph 15 -URI https://asc.fasb.org/extlink&oid=126920106&loc=SL49130558-203045 Reference 10: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 606 -SubTopic 10 -Section 50 -Paragraph 12 -Subparagraph (c) -URI https://asc.fasb.org/extlink&oid=126920106&loc=SL49130554-203045 + Details
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