Derivative Financial Instruments

9 Months Ended

Aug. 31, 2024

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Our derivative activities are recorded at fair value in Financial instruments owned and Financial instruments sold, not yet purchased, net of cash paid or received under credit support agreements and on a net counterparty basis when a legally enforceable right to offset exists under a master netting agreement. We enter into derivative transactions to satisfy the needs of our clients and to manage our own exposure to market and credit risks. In addition, we apply hedge accounting to (1) interest rate swaps that have been designated as fair value hedges of the changes in fair value due to the benchmark interest rate for certain fixed rate senior long-term debt, and (2) forward foreign exchange contracts designated as hedges to offset the change in the value of certain net investments in foreign operations.

Derivatives are subject to various risks similar to other financial instruments, including market, credit and operational risk. The risks of derivatives should not be viewed in isolation, but rather should be considered on an aggregate basis along with our other trading-related activities. We manage the risks associated with derivatives on an aggregate basis along with the risks associated with proprietary trading as part of our firm wide risk management policies.

In connection with our derivative activities, we may enter into International Swaps and Derivatives Association, Inc. master netting agreements or similar agreements with counterparties.


	August 31, 2024 (1)
	Assets			Liabilities
$ in thousands	Fair Value		Number of Contracts (2)	Fair Value		Number of Contracts (2)
Derivatives designated as accounting hedges:
Interest rate contracts:

Cleared OTC	$	—	—	$	3,557	3

Foreign exchange contracts:
Bilateral OTC	—		—	37,891		3
Total derivatives designated as accounting hedges	—			41,448

Derivatives not designated as accounting hedges:
Interest rate contracts:
Exchange-traded	1,248		76,019	411		74,671
Cleared OTC	854,712		6,146	860,359		6,185
Bilateral OTC	513,138		1,728	783,131		874
Foreign exchange contracts:

Bilateral OTC	106,721		53,117	110,132		33,513
Equity contracts:
Exchange-traded	537,457		1,044,597	430,790		914,419
Bilateral OTC	743,300		30,924	748,483		18,918
Commodity contracts:
Exchange-traded	12		629	21		574

Bilateral OTC	5,263		12,739	1,530		5,490
Credit contracts:
Cleared OTC	9,924		40	21,178		23
Bilateral OTC	30,954		15	18,987		38
Total derivatives not designated as accounting hedges	2,802,729			2,975,022
Total gross derivative assets/ liabilities:
Exchange-traded	538,717			431,222
Cleared OTC	864,636			885,094
Bilateral OTC	1,399,376			1,700,154
Amounts offset in our Consolidated Statements of Financial Condition (3):
Exchange-traded	(389,719)			(389,719)
Cleared OTC	(863,799)			(869,789)
Bilateral OTC	(1,016,696)			(1,118,622)
Net amounts per Consolidated Statements of Financial Condition (4)	$	532,515		$	638,340


	November 30, 2023 (1)
	Assets			Liabilities
$ in thousands	Fair Value		Number of Contracts (2)	Fair Value		Number of Contracts (2)
Derivatives designated as accounting hedges:
Interest rate contracts:
Cleared OTC	$	—	—	$	6,070	3
Foreign exchange contracts:
Bilateral OTC	259		1	19,638		3
Total derivatives designated as accounting hedges	259			25,708

Derivatives not designated as accounting hedges:
Interest rate contracts:
Exchange-traded	316		88,354	63		67,643
Cleared OTC	1,156,937		4,415	1,185,503		4,544
Bilateral OTC	893,983		1,179	1,266,506		786
Foreign exchange contracts:
Exchange-traded	—		—	—		4

Bilateral OTC	147,470		66,254	129,770		38,585
Equity contracts:
Exchange-traded	678,542		1,180,832	393,220		1,174,298
Bilateral OTC	715,754		31,116	850,088		16,234
Commodity contracts:
Exchange-traded	59		735	33		940
Bilateral OTC	5,662		15,497	1,398		6,455
Credit contracts:
Cleared OTC	38,046		133	38,487		81
Bilateral OTC	21,436		22	19,573		29
Total derivatives not designated as accounting hedges	3,658,205			3,884,641
Total gross derivative assets/liabilities:
Exchange-traded	678,917			393,316
Cleared OTC	1,194,983			1,230,060
Bilateral OTC	1,784,564			2,286,973
Amounts offset in our Consolidated Statements of Financial Condition (3):
Exchange-traded	(384,392)			(384,392)
Cleared OTC	(1,189,517)			(1,189,513)
Bilateral OTC	(1,533,711)			(1,190,667)
Net amounts per Consolidated Statements of Financial Condition (4)	$	550,844		$	1,145,777

(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)The 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.

(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.

Gains (losses) recognized in Interest expense related to fair value hedges:




$ in thousands	Three Months Ended August 31,				Nine Months Ended August 31,
Gains (Losses)	2024		2023		2024		2023
Interest rate swaps	$	43,765	$	(46,783)	$	12,954	$	(64,847)
Long-term debt	(61,068)		30,345		(62,053)		23,068
Total	$	(17,303)	$	(16,438)	$	(49,099)	$	(41,779)

Gains (losses) on our net investment hedges recognized in Currency translation and other adjustments, a component of Other comprehensive income (loss):




$ in thousands	Three Months Ended August 31,				Nine Months Ended August 31,
Gains (Losses)	2024		2023		2024		2023
Foreign exchange contracts	$	(38,878)	$	(22,086)	$	(47,686)	$	(53,091)
Total	$	(38,878)	$	(22,086)	$	(47,686)	$	(53,091)

Unrealized and realized gains (losses) on derivative contracts recognized primarily in Principal transactions revenues, which are utilized in connection with our client activities and our economic risk management activities:




$ in thousands	Three Months Ended August 31,				Nine Months Ended August 31,
Gains (Losses)	2024		2023		2024		2023
Interest rate contracts	$	72,271	$	44,277	$	107,103	$	175,398
Foreign exchange contracts	15,760		26,173		48,289		63,832
Equity contracts	72,741		185,215		(186,617)		(118,222)
Commodity contracts	6,270		(105)		24,702		(289)
Credit contracts	(222)		(7,623)		(13,592)		(8,447)
Total	$	166,820	$	247,937	$	(20,115)	$	112,272

The net gains (losses) on derivative contracts in the table above are one of a number of activities comprising our business activities and are before consideration of economic hedging transactions, which generally offset the net gains (losses) included above. We substantially mitigate our exposure to market risk on our cash instruments through derivative contracts, which generally provide offsetting revenues, and we manage the risk associated with these contracts in the context of our overall risk management framework.

OTC Derivatives

Remaining contract maturities at August 31, 2024:


	OTC Derivative Assets (1) (2) (3)
$ in thousands	0 – 12 Months		1 – 5 Years		Greater Than 5 Years		Cross-Maturity Netting (4)		Total
Commodity swaps, options and forwards	$	5,262	$	—	$	—	$	—	$	5,262
Equity options and forwards	163,004		49,776		—		(6,461)		206,319
Credit default swaps	—		24,419		—		—		24,419
Total return swaps	108,223		71,606		—		(4,171)		175,658
Foreign currency forwards, swaps and options	43,871		1,053		—		(189)		44,735
Fixed income forwards	6,257		—		—		—		6,257
Interest rate swaps, options and forwards	120,851		244,808		38,644		(77,836)		326,467
Total	$	447,468	$	391,662	$	38,644	$	(88,657)	789,117
Cross product counterparty netting									(20,924)
Total OTC derivative assets included in Financial instruments owned									$	768,193


	OTC Derivative Liabilities (1) (2) (3)
$ in thousands	0 – 12 Months		1 – 5 Years		Greater Than 5 Years		Cross-Maturity Netting (4)		Total
Commodity swaps, options and forwards	$	1,530	$	—	$	—	$	—	$	1,530
Equity options and forwards	108,263		108,550		—		(6,461)		210,352
Credit default swaps	1,985		13,008		—		—		14,993
Total return swaps	97,836		82,521		44		(4,171)		176,230
Foreign currency forwards, swaps and options	85,864		378		—		(189)		86,053
Fixed income forwards	14,978		—		—		—		14,978
Interest rate swaps, options and forwards	107,139		131,627		444,730		(77,836)		605,660
Total	$	417,595	$	336,084	$	444,774	$	(88,657)	1,109,796
Cross product counterparty netting									(20,924)
Total OTC derivative liabilities included in Financial instruments sold, not yet purchased									$	1,088,872

(1)At August 31, 2024, we held net exchange-traded derivative assets and liabilities with a fair value of $149.0 million and $42.1 million, respectively, which are not included in these tables.

(2)OTC derivative assets and liabilities in the tables above are gross of collateral pledged. OTC derivative assets and liabilities are recorded net of collateral pledged in our Consolidated Statements of Financial Condition. At August 31, 2024, cash collateral received and pledged was $384.7 million and $492.6 million, respectively.

(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 assets at August 31, 2024 (in thousands):


Counterparty credit quality (1):
A- or higher	$	167,768
BBB- to BBB+	72,300
BB+ or lower	267,516
Unrated	260,609
Total	$	768,193

(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

External credit ratings of the underlyings or referenced assets for our written credit related derivative contracts:


	August 31, 2024
	External Credit Ratings
$ in millions	Investment Grade		Non-investment Grade		Total Notional
Credit protection sold:
Index credit default swaps	$	270.0	$	348.4	$	618.4


	November 30, 2023
	External Credit Ratings
$ in millions	Investment Grade		Non-investment Grade		Total Notional
Credit protection sold:
Index credit default swaps	$	1,451.5	$	893.9	$	2,345.4

Contingent Features

Certain of our derivative instruments contain provisions that require our debt to maintain an investment grade credit rating from each of the major credit rating agencies. If our debt were to fall below investment grade, it would be in violation of these provisions and the counterparties to the derivative instruments could request immediate payment or demand immediate and ongoing full overnight collateralization on our derivative instruments in liability positions. 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 we have 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	August 31, 2024		November 30, 2023
Derivative instrument liabilities with credit-risk-related contingent features	$	79.9	$	139.5
Collateral posted	(65.4)		(97.6)
Collateral received	101.3		71.0
Return of and additional collateral required in the event of a credit rating downgrade below investment grade (1)	115.8		112.9

(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.