v3.26.1
Derivative Financial Instruments
 6 Months Ended
Jun. 30, 2026
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
Derivative Financial Instruments

Note 8 — Derivative Financial Instruments

We are exposed to certain foreign currency risks. Where possible, we identify exposures in our business that can be offset internally. Where no natural offset is identified, we may choose to enter into various derivative transactions. These instruments have the effect of reducing our exposure to unfavorable changes in foreign currency rates. The Company’s board of directors reviews and approves policies for managing this risk as summarized below. Additional information regarding our derivative financial instruments can be found in Note 10 — Fair Value Measurements and Investments and Note 16 — Accumulated Other Comprehensive Loss.

Foreign Currency Risk

Certain non-U.S. subsidiaries receive revenue and incur expenses in currencies other than their functional currency, and as a result, the foreign subsidiary’s functional currency revenue and/or expenses will fluctuate as the currency rates change. Additionally, the forecast Pounds sterling expenses of our London brokerage market operations may exceed their Pounds sterling revenue, and the entity with such operations may also hold significant foreign currency asset or liability positions in the condensed consolidated balance sheets. To reduce such variability, we use foreign exchange contracts to hedge against this currency risk.

These derivatives were designated as hedging instruments and at June 30, 2026 and December 31, 2025 had total notional amounts of $175 million and $165 million, respectively, with net fair value assets of $1 million and $3 million, respectively.

At June 30, 2026, the Company estimates, based on current exchange rates, there will be $1 million of net derivative gains on forward exchange rates reclassified from accumulated other comprehensive loss into earnings within the next twelve months as the forecast transactions affect earnings. At June 30, 2026, our longest outstanding maturity was 1.7 years.

The effects of the material derivative instruments that are designated as hedging instruments on the condensed consolidated statements of comprehensive income for the three and six months ended June 30, 2026 and 2025 are below. Amounts pertaining to the ineffective

portion of hedging instruments and those excluded from effectiveness testing were not material for the three and six months ended June 30, 2026 and 2025.

 

 

 

Gain recognized in OCI (effective element)

 

 

 

Three Months Ended June 30,

 

 

Six Months Ended June 30,

 

 

 

2026

 

 

2025

 

 

2026

 

 

2025

 

Forward exchange contracts

 

$

2

 

 

$

7

 

 

$

—

 

 

$

10

 

 

Location of (loss)/gain reclassified from Accumulated OCL into income (effective element)

 

(Loss)/gain reclassified from Accumulated OCL into income (effective element)

 

 

 

Three Months Ended June 30,

 

 

Six Months Ended June 30,

 

 

 

2026

 

 

2025

 

 

2026

 

 

2025

 

Revenue

 

$

—

 

 

$

(1

)

 

$

—

 

 

$

—

 

Salaries and benefits

 

 

—

 

 

 

2

 

 

 

—

 

 

 

1

 

Other income/(loss), net

 

 

—

 

 

 

1

 

 

 

1

 

 

 

1

 

 

 

$

—

 

 

$

2

 

 

$

1

 

 

$

2

 

 

The Company engages in intercompany borrowing and lending between subsidiaries, primarily through its in-house banking operations which give rise to foreign exchange exposures. The Company mitigates these risks through the use of short-term foreign currency forward and swap transactions that offset the underlying exposure created when the borrower and lender have different functional currencies. These derivatives are not generally designated as hedging instruments, and at June 30, 2026 and December 31, 2025, we had notional amounts of $683 million and $739 million, respectively, with a net fair value liability of $1 million and a net fair value asset of $1 million, respectively. Such derivatives typically mature within three months.

The effects of derivatives that have not been designated as hedging instruments on the condensed consolidated statements of comprehensive income for the three and six months ended June 30, 2026 and 2025 are as follows (see Note 15 — Other Income/(Loss), Net for the net foreign currency impact on the Company’s condensed consolidated statements of comprehensive income which includes the results of the offset of underlying exposures). Additionally, the Company had foreign exchange option derivatives to hedge against cash flow risk associated with its now-completed Cushon acquisition (see Note 3 — Acquisitions). These derivatives were not designated as hedging instruments and matured during the second quarter of 2026. The effect of the foreign exchange options on the condensed consolidated statements of comprehensive income was not material for the three and six months ended June 30, 2026.

 

 

 

 

 

Gain/(loss) recognized in income

 

 

 

 

 

Three Months Ended
June 30,

 

 

Six Months Ended
June 30,

 

Derivatives not designated as hedging instruments:

 

Location of gain/(loss)
recognized in income

 

2026

 

 

2025

 

 

2026

 

 

2025

 

Forward exchange contracts

 

Other income/(loss), net

 

$

2

 

 

$

9

 

 

$

(5

)

 

$

11