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Fair Value Measurements
 3 Months Ended
Mar. 31, 2024
Fair Value Measurements [Abstract]  
Fair Value Measurements

7. Fair Value Measurements

 

Overview

 

ASC 820 defines fair value, establishes a framework for measuring fair value as well as a hierarchy of fair value inputs. Refer to the below as well as Note 2 – Summary of Significant Accounting Policies in the Company’s 2023 Form 10-K for further information regarding fair value hierarchy, valuation techniques and other items related to fair value measurements.

 

Financial Assets and Liabilities Measured at Fair Value on a Recurring Basis

 

The tables below present, by level within the fair value hierarchy, financial assets and liabilities, measured at fair value on a recurring basis for the periods indicated. As required by ASC Topic 820, financial assets and financial liabilities are classified in their entirety based on the lowest level of input that is significant to the respective fair value measurement.

 

   As of March 31, 2024 
   Level 1   Level 2   Level 3   Total 
Assets                
Cash and securities segregated for regulatory purposes                
U.S. government securities  $100,440,000   $
—
   $
—
   $100,440,000 
                     
Securities owned, at fair value                    
U.S. government securities  $17,825,000   $
—
   $
—
   $17,825,000 
Certificates of deposit   
—
    114,000    
—
    114,000 
Municipal securities   
—
    154,000    
—
    154,000 
Corporate bonds   
—
    24,000    
—
    24,000 
Equity securities   76,000    1,077,000    
—
    1,153,000 
Total Securities owned, at fair value  $17,901,000   $1,369,000   $
—
   $19,270,000 
                     
Liabilities                    
Securities sold, not yet purchased, at fair value                    
Equity securities  $
—
   $1,000   $
—
   $1,000 
Total Securities sold, not yet purchased, at fair value  $
—
   $1,000   $
—
   $1,000 

 

   As of December 31, 2023 
   Level 1   Level 2   Level 3   Total 
Assets                
Cash and securities segregated for regulatory purposes                
U.S. government securities  $115,515,000   $
—
   $
—
   $115,515,000 
                     
Securities owned, at fair value                    
U.S. government securities  $17,636,000   $
—
   $
—
   $17,636,000 
Certificates of deposit   
—
    114,000    
—
    114,000 
Corporate bonds   
—
    3,000    
—
    3,000 
Options   2,000    
—
    
—
    2,000 
Equity securities   146,000    137,000    
—
    283,000 
Total Securities owned, at fair value  $17,784,000   $254,000   $
—
   $18,038,000 
                     
Liabilities                    
Securities sold, not yet purchased, at fair value                    
Equity securities  $2,000   $
—
   $
—
   $2,000 
Total Securities sold, not yet purchased, at fair value  $2,000   $
—
   $
—
   $2,000 

 

The Company had U.S. government securities, certificates of deposit, municipal securities, and corporate bonds with the market values and maturity dates for the periods indicated below:

 

   As of
March 31,
2024		 
Maturing in 2024  $114,173,000 
Maturing in 2025   3,953,000 
Maturing in 2026   15,000 
Maturing after 2026   261,000 
Accrued interest   156,000 
Total Market value  $118,558,000 

 

   As of
December 31,
2023		 
Maturing in 2023  $30,000,000 
Maturing in 2024   98,931,000 
Maturing in 2025   3,965,000 
Maturing after 2025   115,000 
Accrued interest   257,000 
Total Market value  $133,268,000 

 

Financial Assets and Liabilities Not Carried at Fair Value

 

The following represents financial instruments in which the ending balances as of March 31, 2024 and December 31, 2023 are not carried at fair value in the statements of financial condition:

 

Short-term financial instruments: The carrying value of short-term financial instruments, including cash and cash equivalents as well as cash and securities segregated for regulatory purposes, are recorded at amounts that approximate the fair value of these instruments. These financial instruments generally expose the Company to limited credit risk and have no stated maturities or have short-term maturities and carry interest rates that approximate market rates. The Company had no cash equivalents for regulatory purposes as of March 31, 2024 and December 31, 2023. Securities segregated for regulatory purposes consist solely of U.S. government securities and are included in the fair value hierarchy table above. Cash and cash equivalents and cash and securities segregated for regulatory purposes are classified as level 1.

 

Receivables and other assets: Receivables from customers, receivables from non-customers, receivables from and deposits with broker-dealers and clearing organizations, other receivables, and prepaid expenses and other assets are recorded at amounts that approximate fair value and are classified as level 2 under the fair value hierarchy. The Company may hold cash equivalents related to rent deposits in prepaid expenses and other assets that are categorized as level 2 under the fair value hierarchy.

 

Securities borrowed and securities loaned: Securities borrowed and securities loaned are recorded at amounts which approximate fair value and are primarily classified as level 2 under the fair value hierarchy. The Company’s securities borrowed and securities loaned balances represent amounts of equity securities borrow and loan contracts and are marked-to-market daily in accordance with standard industry practices which approximate fair value.

 

Payables: Payables to customers, payables to non-customers, drafts payable, payables to broker-dealers and clearing organizations, accounts payable and accrued liabilities, and taxes payable are recorded at amounts that approximate fair value due to their short-term nature and are classified as level 2 under the fair value hierarchy.

 

Deferred contract incentive: The carrying amount of the deferred contract incentive approximates fair value due to the relative short-term nature of the liability. Under the fair value hierarchy, the deferred contract incentive is classified as level 2.

 

Bank loans: The carrying amount of the bank loans approximates fair value due to the short-term nature of the liability. Under the fair value hierarchy, the bank loans are classified as level 2.

 

Long-term debt: The carrying amount of the mortgage with East West Bank approximates the fair value at the time of issuance as it reflected terms that approximated market terms for similar arrangements. During the periods presented, the interest rate has increased to reflect current market terms, which would favorably reduce the fair value of long-term debt. Under the fair value hierarchy, the mortgage is classified as level 2.

 

Contract settlement liability: The carrying amount of the contract settlement liability approximates fair value which is the present value of the payments at a discount rate as of the date of the agreement. Under the fair value hierarchy, the contract settlement liability is classified as level 2.