Derivative Financial Instruments (Tables)

3 Months Ended

Feb. 28, 2018

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Fair Value and Related Number of Derivative Contracts Categorized by Type of Derivative Contract

The following tables present the fair value and related number of derivative contracts at February 28, 2018 and November 30, 2017 categorized by type of derivative contract and the platform on which these derivatives are transacted. The fair value of assets/liabilities represents our receivable/payable for derivative financial instruments, gross of counterparty netting and cash collateral received and pledged. The following tables also provide information regarding 1) the extent to which, under enforceable master netting arrangements, such balances are presented net in our Consolidated Statements of Financial Condition as appropriate under U.S. GAAP and 2) the extent to which other rights of setoff associated with these arrangements exist and could have an effect on our financial position (in thousands, except contract amounts).



	February 28, 2018 (1)
	Assets				Liabilities
	Fair Value			Number of Contracts (2)	Fair Value			Number of Contracts (2)
Derivatives designated as accounting hedges:
Interest rate contracts:
Cleared OTC	$	—		—	$	28,269		1
Total derivatives designated as accounting hedges	—				28,269

Derivatives not designated as accounting hedges:
Interest rate contracts:
Exchange-traded	3,282			35,757	—			9,024
Cleared OTC	452,564			2,192	413,582			2,128
Bilateral OTC	344,094			865	535,160			1,503
Foreign exchange contracts:
Exchange-traded	1			1,415	—			189
Bilateral OTC	307,003			4,274	299,608			4,278
Equity contracts:
Exchange-traded	1,326,593			2,397,933	1,788,034			1,998,694
Bilateral OTC	98,299			2,091	410,960			1,983
Commodity contracts:
Exchange-traded	223			4,066	71			4,107
Credit contracts:
Cleared OTC	18,870			49	10,715			46
Bilateral OTC	7,655			97	13,470			59
Total derivatives not designated as accounting hedges	2,558,584				3,471,600
Total gross derivative assets/ liabilities:
Exchange-traded	1,330,099				1,788,105
Cleared OTC	471,434				452,566
Bilateral OTC	757,051				1,259,198
Amounts offset in our Consolidated Statements of Financial Condition (3):
Exchange-traded	(1,271,323		)		(1,271,323		)
Cleared OTC	(431,247		)		(445,690		)
Bilateral OTC	(706,476		)		(933,115		)
Net amounts per Consolidated Statements of Financial Condition (4)	$	149,538			$	849,741


(1)	Exchange-traded derivatives include derivatives executed on an organized exchange. Cleared OTC derivatives include derivatives executed bilaterally and subsequently novated to and cleared through central clearing counterparties. Bilateral OTC derivatives include derivatives executed and settled bilaterally without the use of an organized exchange or central clearing counterparty.


(2)	Number of exchange traded contracts may include open futures contracts. The unsettled fair value of these futures contracts is included in Receivables from/Payables to brokers, dealers and clearing organizations in our Consolidated Statements of Financial Condition.


(3)	Amounts netted include both netting by counterparty and for cash collateral paid or received.


(4)	We have not received or pledged additional collateral under master netting agreements and/or other credit support agreements that is eligible to be offset beyond what has been offset in our Consolidated Statements of Financial Condition.



	November 30, 2017 (1)
	Assets				Liabilities
	Fair Value			Number of Contracts (2)	Fair Value			Number of Contracts (2)
Derivatives designated as accounting hedges:
Interest rate contracts:
Cleared OTC (3)	$	—		—	$	2,420		1
Total derivatives designated as accounting hedges	—				2,420

Derivatives not designated as accounting hedges:
Interest rate contracts:
Exchange-traded	1,957			33,972	66			8,515
Cleared OTC (3)	1,334,878			2,711	1,263,994			2,948
Bilateral OTC	380,223			1,804	444,716			1,346
Foreign exchange contracts:
Exchange-traded	157			2,045	20			101
Bilateral OTC	303,091			4,338	286,582			4,361
Equity contracts:
Exchange-traded	1,288,295			2,654,555	1,375,832			2,090,935
Bilateral OTC	78,812			1,847	247,750			1,722
Commodity contracts:
Exchange-traded	209			3,723	18			3,819
Credit contracts:
Cleared OTC	5,506			18	8,613			27
Bilateral OTC	24,921			110	33,188			164
Total derivatives not designated as accounting hedges	3,418,049				3,660,779
Total gross derivative assets/liabilities:
Exchange-traded	1,290,618				1,375,936
Cleared OTC	1,340,384				1,275,027
Bilateral OTC	787,047				1,012,236
Amounts offset in our Consolidated Statements of Financial Condition (4):
Exchange-traded	(1,268,043		)		(1,268,043		)
Cleared OTC (3)	(1,319,895		)		(1,274,900		)
Bilateral OTC	(666,278		)		(883,306		)
Net amounts per Consolidated Statements of Financial Condition (5)	$	163,833			$	236,950


(1)	Exchange-traded derivatives include derivatives executed on an organized exchange. Cleared OTC derivatives include derivatives executed bilaterally and subsequently novated to and cleared through central clearing counterparties. Bilateral OTC derivatives include derivatives executed and settled bilaterally without the use of an organized exchange or central clearing counterparty.


(2)	Number of exchange traded contracts may include open futures contracts. The unsettled fair value of these futures contracts is included in Receivables from/Payables to brokers, dealers and clearing organizations in our Consolidated Statements of Financial Condition.

(3)

Pursuant to a rule change by the London Clearing House in the first fiscal quarter of 2018, variation margin exchanged each day with this clearing organization on certain interest rate derivatives is characterized as settlement payments as opposed to cash posted as collateral. The impact of this rule change would have been a reduction in gross interest rate derivative assets and liabilities as of November 30, 2017 of approximately $800 million, and a corresponding decrease in counterparty and cash collateral netting, with no impact to our Consolidated Statement of Financial Condition.


(4)	Amounts netted include both netting by counterparty and for cash collateral paid or received.


(5)	We have not received or pledged additional collateral under master netting agreements and/or other credit support agreements that is eligible to be offset beyond what has been offset in our Consolidated Statements of Financial Condition.

Unrealized and Realized Gains (Losses) on Derivative Contracts

The following table provides information related to gains (losses) recognized in Interest expense in our Consolidated Statements of Earnings on a fair value hedge (in thousands):



	Three Months Ended February 28,
Gains (Losses)	2018			2017
Interest rate swaps	$	(21,221	)	$	(4,609	)
Long-term debt	22,715			5,405
Total	$	1,494		$	796

The following table presents unrealized and realized gains (losses) on derivative contracts recognized in Principal transactions revenue in our Consolidated Statements of Earnings, which are utilized in connection with our client activities and our economic risk management activities (in thousands):



	Three Months Ended February 28,
Gains (Losses)	2018			2017
Interest rate contracts	$	26,962		$	9,997
Foreign exchange contracts	4,263			2,008
Equity contracts	(163,441		)	(169,116		)
Commodity contracts	(177		)	(511		)
Credit contracts	382			12,041
Total	$	(132,011	)	$	(145,581	)

Remaining Contract Maturity of Fair Value of OTC Derivative Assets and Liabilities

The following tables set forth by remaining contract maturity the fair value of OTC derivative assets and liabilities at February 28, 2018 (in thousands):



	OTC Derivative Assets (1) (2) (3)
	0 – 12 Months		1 – 5 Years		Greater Than 5 Years		Cross-Maturity Netting (4)			Total
Equity swaps and options	$	1,156	$	6,907	$	—	$	—		$	8,063
Credit default swaps	—		12,996		—		—			12,996
Total return swaps	28,882		5,843		—		(1,595		)	33,130
Foreign currency forwards, swaps and options	56,436		561		—		(257		)	56,740
Fixed income forwards	39		—		—		—			39
Interest rate swaps, options and forwards	31,049		98,340		84,770		(86,162		)	127,997
Total	$	117,562	$	124,647	$	84,770	$	(88,014	)	238,965
Cross product counterparty netting										(20,558		)
Total OTC derivative assets included in Financial instruments owned										$	218,407


(1)	At February 28, 2018, we held exchange-traded derivative assets and other credit agreements with a fair value of $58.7 million, which are not included in this table.


(2)	OTC derivative assets in the table above are gross of collateral received. OTC derivative assets are recorded net of collateral received in our Consolidated Statements of Financial Condition. At February 28, 2018, cash collateral received was $127.6 million.


(3)	Derivative fair values include counterparty netting within product category.


(4)	Amounts represent the netting of receivable balances with payable balances for the same counterparty within product category across maturity categories.



	OTC Derivative Liabilities (1) (2) (3)
	0 – 12 Months		1 – 5 Years		Greater Than 5 Years		Cross-Maturity Netting (4)			Total
Equity swaps and options	$	15,297	$	170,529	$	4,057	$	—		$	189,883
Credit default swaps	31		8,994		—		—			9,025
Total return swaps	46,255		115,708		—		(1,595		)	160,368
Foreign currency forwards, swaps and options	49,425		374		—		(257		)	49,542
Fixed income forwards	4,669		—		—		—			4,669
Interest rate swaps, options and forwards	37,996		127,317		227,911		(86,162		)	307,062
Total	$	153,673	$	422,922	$	231,968	$	(88,014	)	720,549
Cross product counterparty netting										(20,558		)
Total OTC derivative liabilities included in Financial instruments sold, not yet purchased										$	699,991


(1)	At February 28, 2018, we held exchange-traded derivative liabilities and other credit agreements with a fair value of $518.4 million, which are not included in this table.


(2)	OTC derivative liabilities in the table above are gross of collateral pledged. OTC derivative liabilities are recorded net of collateral pledged in our Consolidated Statements of Financial Condition. At February 28, 2018, cash collateral pledged was $368.7 million.


(3)	Derivative fair values include counterparty netting within product category.


(4)	Amounts represent the netting of receivable balances with payable balances for the same counterparty within product category across maturity categories.

Counterparty Credit Quality with Respect to Fair Value of OTC Derivatives Assets

The following table presents the counterparty credit quality with respect to the fair value of our OTC derivative assets at February 28, 2018 (in thousands):



Counterparty credit quality (1):
A- or higher	$	162,911
BBB- to BBB+	12,292
BB+ or lower	30,322
Unrated	12,882
Total	$	218,407


(1)	We utilize internal credit ratings determined by our Risk Management department. Credit ratings determined by Risk Management use methodologies that produce ratings generally consistent with those produced by external rating agencies.

Credit Related Derivative Contracts

The external credit ratings of the underlyings or referenced assets for our written credit related derivative contracts (in millions):



	February 28, 2018
	External Credit Rating
	Investment Grade		Non-investment Grade		Total Notional
Credit protection sold:
Index credit default swaps	$	105.0	$	71.5	$	176.5
Single name credit default swaps	42.7		30.6		73.3



	November 30, 2017
	External Credit Rating
	Investment Grade		Non-investment Grade		Total Notional
Credit protection sold:
Index credit default swaps	$	3.0	$	46.0	$	49.0
Single name credit default swaps	129.1		89.1		218.2

- Definition

Tabular disclosure of credit derivatives which includes information by sellers of credit derivatives, about each credit derivative, or each group of similar credit derivatives, including (a) the nature of the credit derivative - its term, how it arose, the events or circumstances that would require the seller to perform under the credit derivative, and the current status of the payment/performance risk of the credit derivative; (b) the maximum potential amount of future payments (undiscounted) the seller could be required to make under the credit derivative; (c) the current fair value of the credit derivative; and (d) the nature of any recourse provisions under the credit derivative, and any assets held either as collateral or by third parties. A credit derivative is a derivative instrument (1) in which one or more of its underlyings are related to the credit risk of a specified entity (or a group of entities) or an index based on the credit risk of a group of entities and (2) that exposes the seller to potential loss from credit-risk-related events specified in the contract. Examples of credit derivatives within the scope of this paragraph include, but are not limited to, credit default swaps, credit spread options, and credit index products; also includes a hybrid instrument that has an embedded credit derivative (for example, but not limited to, a credit-linked note).

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