DERIVATIVES AND HEDGING ACTIVITIES

9 Months Ended

Sep. 30, 2023

Derivative Instruments and Hedging Activities Disclosure [Abstract]

NOTE 9: DERIVATIVES AND HEDGING ACTIVITIES

As of September 30, 2023, we had two interest rate floors that were designated as cash flow hedges of interest rate risk associated with our margin receivables. One interest rate floor with a notional amount of $2 billion was effective as of June 30, 2023 and another with a notional amount of $1 billion will be effective in the first quarter of 2024. Both interest rate floors have a maturity of six months.

As of September 30, 2023, the fair value of hedging instruments was immaterial and included in other current assets in our unaudited condensed consolidated balance sheets. We had no derivatives and hedging activities during the year ended December 31, 2022.

Amounts reported in AOCI related to interest rate floors will be reclassified to net interest revenues as interest payments are received or paid on the hedged items. During the next 12 months, we expect to reclassify $4 million of losses from AOCI as a reduction to net interest revenues. As of September 30, 2023, we hedged our exposure to the variability in future cash flows for forecasted transactions over a maximum period of one year.

The following table summarizes the amount of gain or loss recognized in AOCI on our unaudited condensed consolidated financial statements:


	Three Months Ended September 30,				Nine Months Ended September 30,
(in millions)	2022		2023		2022		2023
Derivatives designated as hedging instruments:
Loss on derivatives included in effectiveness assessment	$	—	$	(1)	$	—	$	(4)

The following table summarizes the components of AOCI related to hedging activities on our unaudited condensed consolidated financial statements:


	Three Months Ended September 30,				Nine Months Ended September 30,
(in millions)	2022		2023		2022		2023
Beginning balance	$	—	$	(3)	$	—	$	—
Other comprehensive loss before reclassifications, net of tax	—		(1)		—		(4)
Reclassification adjustment for net losses included in net interest revenues, net of tax	—		—		—		—
Other comprehensive loss after reclassifications, net of tax	$	—	$	(1)	$	—	$	(4)
Ending balance	$	—	$	(4)	$	—	$	(4)