Derivative Financial Instruments (Tables)

3 Months Ended

Feb. 29, 2020

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Fair Value And Related Number Of Derivative Contracts Categorized By Predominant Risk Exposure

The following tables present the fair value and related number of derivative contracts at February 29, 2020 and November 30, 2019 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 the Consolidated Statements of Financial Condition as appropriate under 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):

	Assets				Liabilities
	Fair Value			Number of Contracts (2)	Fair Value			Number of Contracts (2)
February 29, 2020 (1)
Derivatives designated as accounting hedges:
Interest rate contracts:
Cleared OTC	$	49,445		1	$	—		—
Total derivatives designated as accounting hedges	49,445				—
Derivatives not designated as accounting hedges:
Interest rate contracts:
Exchange-traded	578			57,570	33			51,180
Cleared OTC	951,325			3,785	1,058,707			4,150
Bilateral OTC	596,520			1,770	280,336			460
Foreign exchange contracts:
Exchange-traded	—			619	—			1,205
Bilateral OTC	389,074			17,047	391,942			16,213
Equity contracts:
Exchange-traded	861,786			1,441,642	1,091,912			1,181,907
Bilateral OTC	449,287			3,716	706,813			3,740
Commodity contracts:
Exchange-traded	—			10,866	—			10,134
Bilateral OTC	40,159			3,640	—			—
Credit contracts:
Cleared OTC	4,220			39	3,566			23
Bilateral OTC	12,816			14	13,475			12
Total derivatives not designated as accounting hedges	3,305,765				3,546,784
Total gross derivative assets/liabilities:
Exchange-traded	862,364				1,091,945
Cleared OTC	1,004,990				1,062,273
Bilateral OTC	1,487,856				1,392,566
Amounts offset in Consolidated Statement of Financial Condition (3):
Exchange-traded	(802,389		)		(802,389		)
Cleared OTC	(967,250		)		(982,561		)
Bilateral OTC	(947,803		)		(1,064,222		)
Net amounts in the Consolidated Statement of Financial Condition (4)	$	637,768			$	697,612

(continued)

	Assets				Liabilities
	Fair Value			Number of Contracts (2)	Fair Value			Number of Contracts (2)
November 30, 2019 (1)
Derivatives designated as accounting hedges:
Interest rate contracts:
Cleared OTC	$	28,663		1	$	—		—
Total derivatives designated as accounting hedges	28,663				—
Derivatives not designated as accounting hedges:
Interest rate contracts:
Exchange-traded	1,191			65,226	103			38,464
Cleared OTC	213,224			3,329	284,433			3,443
Bilateral OTC	421,700			1,325	258,857			738
Foreign exchange contracts:
Exchange-traded	—			256	—			199
Bilateral OTC	191,218			9,257	187,836			9,187
Equity contracts:
Exchange-traded	717,494			1,714,538	962,535			1,481,388
Bilateral OTC	248,720			4,731	445,241			4,271
Commodity contracts:
Exchange-traded	—			5,524	—			4,646
Bilateral OTC	20,600			4,084	391			359
Credit contracts:
Cleared OTC	2,514			13	5,768			12
Bilateral OTC	6,281			25	14,219			28
Total derivatives not designated as accounting hedges	1,822,942				2,159,383
Total gross derivative assets/liabilities:
Exchange-traded	718,685				962,638
Cleared OTC	244,401				290,201
Bilateral OTC	888,519				906,544
Amounts offset in Consolidated Statement of Financial Condition (3):
Exchange-traded	(688,871		)		(688,871		)
Cleared OTC	(222,869		)		(266,900		)
Bilateral OTC	(521,457		)		(676,407		)
Net amounts in the Consolidated Statement of Financial Condition (4)	$	418,408			$	527,205

(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 and Payables, expense accruals and other liabilities in the 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 the 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 of Jefferies Group in the Consolidated Statements of Operations on a fair value hedge (in thousands):

	For the Three Months Ended
	February 29, 2020			February 28, 2019
Interest rate swaps	$	24,465		$	14,587
Long-term debt	(24,867		)	(15,556		)
Total	$	(402	)	$	(969	)

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

	For the Three Months Ended
	February 29, 2020			February 28, 2019
Interest rate contracts	$	(1,089	)	$	(69,831	)
Foreign exchange contracts	(2,321		)	(176		)
Equity contracts	136,888			(28,481		)
Commodity contracts	16,593			(19,273		)
Credit contracts	1,830			4,095
Total	$	151,901		$	(113,666	)

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 as reflected in the Consolidated Statement of Financial Condition at February 29, 2020 (in thousands):

	OTC Derivative Assets (1) (2) (3)
	0-12 Months		1-5 Years		Greater Than 5 Years		Cross- Maturity Netting (4)			Total
Commodity swaps, options and forwards	$	33,852	$	6,307	$	—	$	—		$	40,159
Equity forwards, swaps and options	28,521		7,516		6,959		(12,901		)	30,095
Credit default swaps	31		4,079		—		(38		)	4,072
Total return swaps	160,829		37,825		—		(11,543		)	187,111
Foreign currency forwards, swaps and options	66,282		3,757		3		(3,005		)	67,037
Fixed income forwards	8,847		—		—		—			8,847
Interest rate swaps, options and forwards	80,128		205,846		236,857		(41,190		)	481,641
Total	$	378,490	$	265,330	$	243,819	$	(68,677	)	818,962
Cross product counterparty netting										(15,399		)
Total OTC derivative assets included in Financial instruments owned, at fair value										$	803,563

(1) At February 29, 2020, we held net exchange-traded derivative assets, other derivative assets and other credit agreements with a fair value of $74.5 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 the Consolidated Statements of Financial Condition. At February 29, 2020, cash collateral received was $240.3 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 forwards, swaps and options	$	35,005	$	193,428	$	80,442	$	(12,901	)	$	295,974
Credit default swaps	1,401		2,539		—		(38		)	3,902
Total return swaps	140,657		71,668		—		(11,543		)	200,782
Foreign currency forwards, swaps and options	70,063		2,861		—		(3,005		)	69,919
Fixed income forwards	581		—		—		—			581
Interest rate swaps, options and forwards	45,919		105,566		111,531		(41,190		)	221,826
Total	$	293,626	$	376,062	$	191,973	$	(68,677	)	792,984
Cross product counterparty netting										(15,399		)
Total OTC derivative liabilities included in Financial instruments sold, not yet purchased, at fair value										$	777,585

(1) At February 29, 2020, we held net exchange-traded derivative liabilities, other derivative liabilities and other credit agreements with a fair value of $292.1 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 the Consolidated Statements of Financial Condition. At February 29, 2020, cash collateral pledged was $372.1 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

At February 29, 2020, the counterparty credit quality with respect to the fair value of our OTC derivative assets was as follows (in thousands):

Counterparty credit quality (1):
A- or higher	$	261,971
BBB- to BBB+	49,721
BB+ or lower	295,398
Unrated	196,473
Total	$	803,563

(1)

We utilize internal credit ratings determined by the Jefferies Group's Risk Management department. Credit ratings determined by Jefferies Group 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 are as follows (in millions):

	External Credit Rating
	Investment Grade		Non-investment grade		Unrated		Total Notional
February 29, 2020
Credit protection sold:
Index credit default swaps	$	2.0	$	291.0	$	—	$	293.0
Single name credit default swaps	$	17.8	$	7.9	$	—	$	25.7
November 30, 2019
Credit protection sold:
Index credit default swaps	$	3.0	$	32.0	$	—	$	35.0
Single name credit default swaps	$	3.4	$	29.0	$	1.5	$	33.9

Derivative Instruments With Contingent Features

The following table presents the aggregate fair value of all derivative instruments with such credit-risk-related contingent features that are in a liability position, the collateral amounts posted or received in the normal course of business and the potential collateral we would have been required to return and/or post additionally to our counterparties if the credit-risk-related contingent features underlying these agreements were triggered (in millions):

	February 29, 2020			November 30, 2019
Derivative instrument liabilities with credit-risk-related contingent features	$	168.1		$	42.9
Collateral posted	$	(87.3	)	$	(3.1	)
Collateral received	$	162.1		$	114.1
Return of and additional collateral required in the event of a credit rating downgrade below investment grade (1)	$	242.9		$	154.0

(1)

These potential outflows include initial margin received from counterparties at the execution of the derivative contract. The initial margin will be returned if counterparties elect to terminate the contract after a downgrade.