We use derivative financial instruments to support our clients' needs and to manage our interest rate and currency risks. These financial instruments consist of FX contracts such as forwards, futures and options contracts; interest rate contracts such as interest rate swaps (cross currency and single currency) and futures; and other derivative contracts. Derivative instruments used for risk management purposes that are highly effective in offsetting the risk being hedged are generally designated as hedging instruments in hedge accounting relationships while others are economic hedges and not designated in hedge accounting relationships. For additional information on our derivative financial instruments, including derivatives not designated as hedging instruments, refer to page 152 in Note 10 to the consolidated financial statements included under Item 8, Financial Statements and Supplementary Data, in our 2018 Form 10-K.

Derivatives designated as fair value hedges are utilized to mitigate the risk of changes in the fair values of recognized assets and liabilities, including long-term debt, AFS securities, and foreign currency investment securities. We use interest rate or FX contracts in this manner to manage our exposure to changes in the fair value of hedged items caused by changes in interest rates or FX rates.

Changes in the fair value of the derivative and changes in fair value of the hedged item due to changes in the hedged risk are recognized in earnings in the same line item. If a hedge is terminated, all remaining adjustments to the carrying amount of the hedged item shall be amortized over a period that is consistent with the amortization of other discounts or premiums associated with the hedged item.

Derivatives designated as cash flow hedges are utilized to offset the variability of cash flows of recognized assets or liabilities or forecasted transactions. We have entered into FX contracts to hedge the change in cash flows attributable to FX movements in foreign currency denominated investment securities. Additionally, we have entered into interest rate swap agreements to hedge the forecasted cash flows associated with London Interbank Offered Rate (LIBOR) indexed floating-rate loans. The interest rate swaps synthetically convert the loan interest receipts from a variable-rate to a fixed-rate, thereby mitigating the risk attributable to changes in the LIBOR benchmark rate.

Changes in fair value of the derivatives designated as cash flow hedges are initially recorded in AOCI and then reclassified into earnings in the same period or periods during which the hedged forecasted transaction affects earnings and are presented in the same income statement line item as the earnings effect of the hedged item. If the hedge relationship is terminated, the change in fair value on the derivative recorded in AOCI is reclassified into earnings consistent with the timing of the hedged item. For hedge relationships that are discontinued because a forecasted transaction is not expected to occur according to the original hedge terms, any related derivative values recorded in AOCI are immediately recognized in earnings. As of March 31, 2019, the maximum maturity date of the underlying loans is approximately 3 years.

Derivatives categorized as net investment hedges are entered into to protect the net investment in our foreign operations against adverse changes in exchange rates. We use FX forward contracts to convert the foreign currency risk to U.S. dollars to mitigate our exposure to fluctuations in FX rates. The changes in fair value of the FX forward contracts are recorded, net of taxes, in the foreign currency translation component of OCI.

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



(In millions)	March 31, 2019		December 31, 2018
Derivatives not designated as hedging instruments:
Interest rate contracts:
Futures	$	4,387	$	2,348
Foreign exchange contracts:
Forward, swap and spot	2,284,676		2,238,819
Options purchased	797		578
Options written	505		576
Futures	414		49
Other:
Stable value contracts⁽¹⁾	26,991		26,634
Deferred value awards⁽²⁾	559		434
Derivatives designated as hedging instruments:
Interest rate contracts:
Swap agreements	10,596		10,596
Foreign exchange contracts:
Forward and swap	3,050		3,412

⁽¹⁾ The notional value of the stable value contracts generally represents our maximum exposure. However, exposure to various stable value contracts is contractually limited to substantially lower amounts than the notional values, which represent the total assets of the stable value funds.

⁽²⁾For additional information on our derivatives not designated as hedging instruments, including deferred value awards, refer to page 152 in Note 10 to the consolidated financial statements under Item 8, Financial Statements and Supplementary Data, in our 2018 Form 10-K.

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.



	March 31, 2019		December 31, 2018		March 31, 2019		December 31, 2018
(In millions)	Derivative Assets⁽¹⁾				Derivative Liabilities⁽²⁾
Derivatives not designated as hedging instruments:
Foreign exchange contracts	$	11,123	$	16,369	$	11,240	$	16,434
Other derivative contracts	—		—		228		214
Total	$	11,123	$	16,369	$	11,468	$	16,648

Derivatives designated as hedging instruments:
Foreign exchange contracts	$	21	$	17	$	60	$	88
Interest rate contracts	—		13		69		71
Total	$	21	$	30	$	129	$	159



		Three Months Ended March 31,
		2019			2018
(In millions)	Location of Gain (Loss) on Derivative in Consolidated Statement of Income	Amount of Gain (Loss) on Derivative Recognized in Consolidated Statement of Income
Derivatives not designated as hedging instruments:
Foreign exchange contracts	Foreign exchange trading services revenue	$	160		$	184
Foreign exchange contracts	Interest expense⁽¹⁾	(39		)	(15		)
Interest rate contracts	Foreign exchange trading services revenue	(1		)	(2		)
Other derivative contracts	Foreign exchange trading services revenue	—			1
Other derivative contracts	Compensation and employee benefits	(74		)	(65		)
Total		$	46		$	103

The following table shows the carrying amount and associated cumulative basis adjustments related to the application of hedge accounting that is included in the carrying amount of hedged assets and liabilities in fair value hedging relationships:



	March 31, 2019
	Hedged Items Currently Designated					Hedged Items No Longer Designated⁽¹⁾
(In millions)	Carrying Amount of Assets and Liabilities⁽²⁾		Cumulative Hedge Accounting Basis Adjustments			Carrying Amount of Assets and Liabilities		Cumulative Hedge Accounting Basis Adjustments
Long-term debt	$	8,271	$	(23	)	$	1,198	$	(17	)
Available-for-sale securities	1,553		76			50		1
Total	$	9,824	$	53		$	1,248	$	(16	)

	December 31, 2018
	Hedged Items Currently Designated					Hedged Items No Longer Designated⁽¹⁾
(In millions)	Carrying Amount of Assets and Liabilities⁽²⁾		Cumulative Hedge Accounting Basis Adjustments			Carrying Amount of Assets and Liabilities		Cumulative Hedge Accounting Basis Adjustments
Long-term debt	$	8,270	$	(137	)	$	1,197	$	(20	)
Available-for-sale securities	1,496		72			50		1
Total	$	9,766	$	(65	)	$	1,247	$	(19	)

⁽²⁾Does not include the carrying amount of hedged items when only foreign currency risk is the designated hedged risk. The carrying amount excluded for investment securities was zero and $458 million for March 31, 2019 and December 31, 2018, respectively.



		Three Months Ended March 31,								Three Months Ended March 31,
		2019			2018					2019				2018
(In millions)	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
Derivatives designated as fair value hedges:
Foreign exchange contracts	Processing fees and other revenue	$	—		$	(13	)	Investment securities	Processing fees and other revenue	$	—			$	13
Foreign exchange contracts	Processing fees and other revenue	—			248			Foreign exchange deposit	Processing fees and other revenue	—			—	(248		)
Interest rate contracts	Net interest income	106			21			Available-for-sale securities⁽¹⁾	Net interest income	(102		)	—	(21		)
Interest rate contracts	Net interest income	(3		)	(167		)	Long-term debt	Net interest income	4			—	156
Total		$	103		$	89				$	(98	)		$	(100	)

⁽¹⁾In the first quarter of 2019, $2 million of net unrealized losses on AFS investment securities designated in fair value hedges was recognized in OCI compared to $18 million of net unrealized gains in the same period in 2018.



	Three Months Ended March 31,						Three Months Ended March 31,
	2019		2018				2019			2018
(In millions)	Amount of Gain or (Loss) Recognized in Other Comprehensive Income on Derivative					Location of Gain or (Loss) Reclassified from Accumulated Other Comprehensive Income into Income	Amount of Gain or (Loss) Reclassified from Accumulated Other Comprehensive Income into Income
Derivatives designated as cash flow hedges:
Interest rate contracts	$	10	$	(20	)	Net interest income	$	(2	)	$	1
Foreign exchange contracts	27		(88		)	Net interest income	7			7
Total derivatives designated as cash flow hedges	$	37	$	(108	)		$	5		$	8

Derivatives designated as net investment hedges:
Foreign exchange contracts	$	20	$	(36	)	Gains (losses) related to investment securities, net	$	—		$	—
Total derivatives designated as net investment hedges	$	20	$	(36	)		$	—		$	—

Total	$	57	$	(144	)		$	5		$	8

Derivatives receivable and payable as well as cash collateral from the same counterparty are netted in the consolidated statement of condition for those counterparties with whom we have legally binding master netting agreements in place. In addition to cash collateral received and transferred presented on a net basis, we also receive and transfer collateral in the form of securities, which mitigate credit risk but are not eligible for netting. Additional information on netting is provided in Note 8.