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Financial Instruments with Off-Balance Sheet Risk

12 Months Ended

Dec. 31, 2024

Financial Instruments with Off-Balance Sheet Risk [Abstract]

Financial Instruments with Off-Balance Sheet Risk

19. Financial Instruments with Off-Balance Sheet Risk

Credit Risk

The Company is engaged in various trading and brokerage activities whose counterparties include broker-dealers, banks and other financial institutions.

In the event the counterparties do not fulfill their obligations, the Company may sustain a loss if the market value of the instrument is different from the contract value of the transaction. The risk of default primarily depends upon the credit worthiness of the counterparties involved in the transactions. It is the Company’s policy to review, as necessary, the credit standing of each counterparty with which it conducts business. The Company experienced no material historical losses in relation to its counterparties for the years ended December 31, 2024 and 2023.

Off-Balance Sheet Risks

The Company enters into various transactions to meet the needs of customers, conduct trading activities, and manage market risks and is, therefore, subject to varying degrees of market and credit risk.

In the normal course of business, the Company’s customer activities involve the execution, settlement, and financing of various customer securities transactions. These activities may expose the Company to off-balance sheet risk in the event the customer or other broker is unable to fulfill their contracted obligations and the Company has to purchase or sell the financial instrument underlying the contract at a loss.

The Company’s customer securities activities are transacted on either a cash or margin basis. In margin transactions, the Company extends credit to its customers, subject to various regulatory and internal margin requirements, and is collateralized by cash and securities in the customers’ accounts. In connection with these activities, the Company executes and clears customer transactions involving the sale of securities not yet purchased, substantially all of which are transacted on a margin basis subject to individual exchange regulations.

Such transactions may expose the Company to off-balance sheet risk in the event margin requirements are not sufficient to fully cover losses that customers may incur. In the event the customer fails to satisfy obligations, the Company may be required to purchase or sell financial instruments at prevailing market prices to fulfill the customer’s obligations.

The Company seeks to control the risks associated with its customer activities by requiring customers to maintain margin collateral in compliance with various regulatory requirements and internal guidelines which meet or exceed regulatory requirements. The Company monitors required margin levels daily and pursuant to such guidelines, requires customers to deposit additional collateral or to reduce positions when necessary.

The Company’s customer financing and securities settlement activities may require the Company to pledge customer securities as collateral in support of various secured financing sources such as bank loans and securities loaned. In the event the counterparty is unable to meet its contractual obligation to return customer securities pledged as collateral, the Company may be exposed to the risk of acquiring the securities at prevailing market prices in order to satisfy its customer obligations. The Company seeks to mitigate this risk by monitoring the market value of securities pledged on a daily basis and by requiring adjustments of collateral levels in the event of excess market exposure. In addition, the Company establishes credit limits for such activities and continuously monitors compliance.

The Company’s securities lending transactions are subject to master netting agreements with other broker-dealers; however, amounts are presented gross in the consolidated statements of financial condition and as net in the consolidated statements of operations for both of the periods presented. The Company further mitigates risk by using a program with a clearing organization which guarantees the return of cash to the Company as well as using industry standard software to ensure daily changes to market value are continuously updated and any changes to collateralization are immediately covered. The Company accounts for securities lending transactions in accordance with Subtopic 210-20.

As of December 31, 2024, the Company had margin loans extended to its customers of approximately $403.8 million, of which $84.4 million is in the line item “Receivables from customers” in the consolidated statements of financial condition. As of December 31, 2023, the Company had margin loans extended to its customers of approximately $338.1 million, of which 72.8 million is in the line item “Receivables from customers” in the consolidated statements of financial condition. There were no material losses for unsettled customer transactions for the years ended December 31, 2024 and 2023.

The following table presents information about the Company’s securities borrowing and lending activity depicting the potential effect of rights of setoff between these recognized assets and liabilities.

		As of December 31, 2024
		Gross Amounts of Recognized Assets and Liabilities				Gross Amounts Offset in the Consolidated Statements of Financial Condition¹				Net Amounts Presented in the Consolidated Statements of Financial Condition				Collateral Received or Pledged²				Net Amount³
Assets
Securities borrowed		$	139,040,000				—			$	139,040,000			$	126,484,000			$	12,556,000
Liabilities
Securities loaned		$	184,962,000				—			$	184,962,000			$	170,780,000			$	14,182,000

		As of December 31, 2023
		Gross Amounts of Recognized Assets and Liabilities				Gross Amounts Offset in the Consolidated Statements of Financial Condition¹				Net Amounts Presented in the Consolidated Statements of Financial Condition				Collateral Received or Pledged²				Net Amount³
Assets
Securities borrowed		$	394,709,000				—			$	394,709,000			$	371,076,000			$	23,633,000
Liabilities
Securities loaned		$	419,433,000				—			$	419,433,000			$	404,312,000			$	15,121,000

⁽¹⁾	Amounts represent recognized assets and liabilities that are subject to enforceable master agreements with rights of setoff. The Company did not net any securities borrowed or securities loaned as of December 31, 2024 or 2023.

⁽²⁾	Represents the fair value of collateral the Company had received or pledged under enforceable master agreements.

⁽³⁾	Represents the total contract value as presented in the consolidated financial statements less the fair market value of the collateral received or pledged.