Derivative Financial Instruments (Tables)

9 Months Ended

Sep. 30, 2018

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Schedule of Interest Rate Derivatives

The table below summarizes the maturities and the fixed interest rates paid for the hedged senior and subordinated notes:

September 30, 2018
Maturity	Fixed Interest Rate Paid
Senior Notes
2020	2.55%
2021	4.38
2021	1.95
2022	2.65
2023	3.70
2024	3.30
2025	3.55
2026	2.65
Subordinated Notes
2023	3.10

Schedule of Outstanding Hedges: (Notional Amount)

The following table presents the aggregate contractual, or notional, amounts of derivative financial instruments entered into in connection with our trading and asset-and-liability management activities as of the dates indicated:

(In millions)	September 30, 2018		December 31, 2017
Derivatives not designated as hedging instruments:
Interest-rate contracts:
Futures	$	14,656	$	2,392
Swap agreements	300		—
Foreign exchange contracts:
Forward, swap and spot	2,389,839		1,679,976
Options purchased	452		350
Options written	267		302
Futures	—		50
Commodity and equity contracts:
Commodity(1)	73		16
Equity(1)	365		50
Other:
Stable value contracts	26,313		26,653
Deferred value awards(2)	497		473
Derivatives designated as hedging instruments:
Interest-rate contracts:
Swap agreements	10,994		11,047
Foreign exchange contracts:
Forward and swap	3,884		28,913

⁽¹⁾ Primarily composed of positions held by a consolidated sponsored investments fund

⁽²⁾ Represents grants of deferred value awards to employees; refer to pages 154 to 155 in Note 10 to the consolidated financial statements included under Item 8, Financial Statements and Supplementary Data, in our 2017 Form 10-K

Notional Amount of Interest Rate Swap Agreements Designated as Fair Value and Cash Flow Hedges

The following tables present the aggregate notional amounts of these interest rate contracts and the related assets or liabilities being hedged as of the dates indicated:

	September 30, 2018
(In millions)	Fair Value Hedges		Cash Flow Hedges		Total
Investment securities available-for-sale	$	1,201	$	—	$	1,201
Long-term debt(1)	8,493		—		8,493
Floating-rate loans	—		1,300		1,300
Total	$	9,694	$	1,300	$	10,994

	December 31, 2017
(In millions)	Fair Value Hedges		Cash Flow Hedges		Total
Investment securities available-for-sale	$	1,254	$	—	$	1,254
Long-term debt(1)	8,493		—		8,493
Floating rate loans	—		1,300		1,300
Total	$	9,747	$	1,300	$	11,047

⁽¹⁾ As of September 30, 2018, these fair value hedges decreased the carrying value of LTD presented in our consolidated statement of condition by $347 million. As of December 31, 2017, these fair value hedges decreased the carrying value of long-term debt presented in our consolidated statement of condition by $87 million.

Schedule of the Fair Values of Derivative Financial Instruments

The following tables present the fair value of derivative financial instruments, excluding the impact of master netting agreements, recorded in our consolidated statement of condition as of the dates indicated. The impact of master netting agreements is provided in Note 8 to the consolidated financial statements in this Form 10-Q.

	Derivative Assets(1)
	Fair Value
(In millions)	September 30, 2018		December 31, 2017
Derivatives not designated as hedging instruments:
Foreign exchange contracts	$	15,032	$	11,477
Interest-rate contracts	1		—
Other derivative contracts	13		1
Total	$	15,046	$	11,478
Derivatives designated as hedging instruments:
Foreign exchange contracts	$	29	$	120
Interest-rate contracts	3		8
Total	$	32	$	128

⁽¹⁾ Derivative assets are included within other assets in our consolidated statement of condition.

	Derivative Liabilities(1)
	Fair Value
(In millions)	September 30, 2018		December 31, 2017
Derivatives not designated as hedging instruments:
Foreign exchange contracts	$	14,878	$	11,361
Interest-rate contracts	1		—
Other derivative contracts	252		284
Total	$	15,131	$	11,645
Derivatives designated as hedging instruments:
Foreign exchange contracts	$	57	$	107
Interest-rate contracts	91		100
Total	$	148	$	207

⁽¹⁾ Derivative liabilities are included within accrued expenses and other liabilities in our consolidated statement of condition.

Impact of Derivatives on Consolidated Statement of Income

The following tables present the impact of our use of derivative financial instruments on our consolidated statement of income for the periods indicated:

	Location of Gain (Loss) on Derivative in Consolidated Statement of Income	Amount of Gain (Loss) on Derivative Recognized in Consolidated Statement of Income
		Three Months Ended September 30,						Nine Months Ended September 30,
(In millions)		2018			2017			2018			2017
Derivatives not designated as hedging instruments:
Foreign exchange contracts	Trading services revenue	$	170		$	152		$	549		$	485
Foreign exchange contracts	Processing fees and other revenue(1)	—			(9		)	—			(11		)
Foreign exchange contracts	Interest expense(1)	(3		)	—			(18		)	—
Interest-rate contracts	Trading services revenue	(2		)	(2		)	(6		)	7
Interest-rate contracts	Processing fees and other revenue	(1		)	—			(1		)	—
Other derivative contracts	Trading services revenue	3			—			3			—
Other derivative contracts	Compensation and employee benefits	(34		)	(25		)	(140		)	(120		)
Total		$	133		$	116		$	387		$	361

⁽¹⁾ The first nine months of 2018 includes approximately $15 million of swap costs related to the first quarter of 2018 that were reclassified from Processing fees and other revenues to NII.

	Amount of Gain (Loss) on Derivative Recognized in Other Comprehensive Income						Location of Gain (Loss) Reclassified from OCI to Consolidated Statement of Income	Amount of Gain (Loss) Reclassified from OCI to Consolidated Statement of Income				Location of Gain (Loss)  on Derivative in Consolidated Statement of Income	Amount of Gain (Loss) on Derivatives Recognized in Consolidated Statement of Income
	Three Months Ended September 30,							Three Months Ended September 30,					Three Months Ended September 30,
(In millions)	2018			2017				2018		2017			2018			2017
Derivatives designated as cash flow hedges:
Interest-rate contracts	$	(6	)	$	(1	)	Net interest income	$	—	$	—	Net interest income	$	(1	)	$	—
Foreign exchange contracts	32			(1		)	Net interest income	—		—		Net interest income	6			5
	$	26		$	(2	)		$	—	$	—		$	5		$	5
Derivatives designated as net investment hedges:
Foreign exchange contracts	$	19		$	(47	)	Gains (Losses) related to investment securities, net	$	—	$	—	Gains (Losses) related to investment securities, net	$	—		$	—
Total	$	19		$	(47	)	Total	$	—	$	—	Total	$	—		$	—

	Amount of Gain (Loss) on Derivative Recognized in Other Comprehensive Income						Location of Gain (Loss) Reclassified from OCI to Consolidated Statement of Income	Amount of Gain (Loss) Reclassified from OCI to Consolidated Statement of Income				Location of Gain (Loss)  on Derivative in Consolidated Statement of Income	Amount of Gain (Loss) on Derivatives Recognized in Consolidated Statement of Income
	Nine Months Ended September 30,							Nine Months Ended September 30,					Nine Months Ended September 30,
(In millions)	2018			2017				2018		2017			2018		2017
Derivatives designated as cash flow hedges:
Interest-rate contracts	$	(35	)	$	(2	)	Net interest income	$	—	$	—	Net interest income	$	—	$	—
Foreign exchange contracts	(6		)	(93		)	Net interest income	—		—		Net interest income	20		18
	$	(41	)	$	(95	)		$	—	$	—		$	20	$	18
Derivatives designated as net investment hedges:
Foreign exchange contracts	$	54		$	(148	)	Gains (Losses) related to investment securities, net	$	—	$	—	Gains (Losses) related to investment securities, net	$	—	$	—
Total	$	54		$	(148	)	Total	$	—	$	—	Total	$	—	$	—

Schedule of Differences Between the Gains (Losses) on the Derivative and the Gains (Losses) on the Hedged Item

	Location of Gain (Loss) on Derivative in Consolidated Statement of Income	Amount of Gain (Loss) on Derivative Recognized in Consolidated Statement of Income						Hedged Item in Fair Value Hedging Relationship	Location of Gain (Loss) on Hedged Item in Consolidated Statement of Income	Amount of Gain (Loss) on Hedged Item Recognized in Consolidated Statement of Income
		Three Months Ended September 30,								Three Months Ended September 30,
(In millions)		2018			2017					2018			2017
Derivatives designated as fair value hedges:
Foreign exchange contracts	Processing fees and other revenue	$	(14	)	$	19		Investment securities	Processing fees and other revenue	$	14		$	(19	)
Foreign exchange contracts	Processing fees and other revenue	33			200			FX deposit	Processing fees and other revenue	(33		)	(200		)
Interest-rate contracts(1)	Net interest income(2)	9			—			Available-for-sale securities	Net interest income(2)	(8		)	—
Interest-rate contracts(1)	Net interest income	(40		)	—			Long-term debt	Net interest income	39			—
Interest-rate contracts(1)	Processing fees and other revenue	—			9			Available-for-sale securities	Processing fees and other revenue(2)	—			(9		)
Interest-rate contracts(1)	Processing fees and other revenue	—			(8		)	Long-term debt	Processing fees and other revenue	—			5
Total		$	(12	)	$	220				$	12		$	(223	)
	Location of Gain (Loss) on Derivative in Consolidated Statement of Income	Amount of Gain (Loss) on Derivative Recognized in Consolidated Statement of Income						Hedged Item in Fair Value Hedging Relationship	Location of Gain (Loss) on Hedged Item in Consolidated Statement of Income	Amount of Gain (Loss) on Hedged Item Recognized in Consolidated Statement of Income
		Nine Months Ended September 30,								Nine Months Ended September 30,
(In millions)		2018			2017					2018			2017
Derivatives designated as fair value hedges:
Foreign exchange contracts	Processing fees and other revenue	$	(57	)	$	21		Investment securities	Processing fees and other revenue	$	57		$	(21	)
Foreign exchange contracts	Processing fees and other revenue	(320		)	1,282			FX deposit	Processing fees and other revenue	320			(1,282		)
Interest-rate contracts(1)	Net interest income	(254		)	—			Long-term debt	Net interest income	239			—
Interest-rate contracts(1)	Net interest income(3)	40			—			Available-for-sale securities	Net interest income(3)	(38		)	—
Interest-rate contracts(1)	Processing fees and other revenue	—			23			Available-for-sale securities	Processing fees and other revenue(3)	—			(21		)
Interest-rate contracts(1)	Processing fees and other revenue	—			37			Long-term debt	Processing fees and other revenue	—			(39		)
Total		$	(591	)	$	1,363				$	578		$	(1,363	)

⁽¹⁾As of January 1, 2018, we prospectively changed the presentation of gains (losses) on hedging instruments and hedge items designated as fair value hedges of interest rate risk, and any resulting hedge ineffectiveness, from processing fees and other revenue to NII.

⁽²⁾In the three months ended September 30, 2018 and 2017, $20 million and $4 million, respectively, of net unrealized (losses) gains on AFS investment securities designated in fair value hedges were recognized in OCI.

⁽³⁾In the nine months ended September 30, 2018 and 2017, $29 million and $13 million, respectively, of net unrealized (losses) gains on AFS investment securities designated in fair value hedges were recognized in OCI.