Derivative Financial Instruments

12 Months Ended

Nov. 30, 2013

Derivative Instruments And Hedging Activities Disclosure [Abstract]

Derivative Financial Instruments

Note 8.  Derivative Financial Instruments

Off-Balance Sheet Risk

We have contractual commitments arising in the ordinary course of business for securities loaned or purchased under agreements to resell, repurchase agreements, future purchases and sales of foreign currencies, securities transactions on a when-issued basis and underwriting. Each of these financial instruments and activities contains varying degrees of off-balance sheet risk whereby the fair values of the securities underlying the financial instruments may be in excess of, or less than, the contract amount. The settlement of these transactions is not expected to have a material effect upon our consolidated financial statements.

Derivative Financial Instruments

Our derivative activities are recorded at fair value in the Consolidated Statements of Financial Condition in Financial instruments owned – derivatives and Financial instruments sold, not yet purchased – derivatives net of cash paid or received under credit support agreements and on a net counterparty basis when a legal right to offset exists under a master netting agreement. Net realized and unrealized gains and losses are recognized in Principal transactions in the Consolidated Statements of Earnings on a trade date basis and as a component of cash flows from operating activities in the Consolidated Statements of Cash Flows. Acting in a trading capacity, we may enter into derivative transactions to satisfy the needs of our clients and to manage our own exposure to market and credit risks resulting from our trading activities. (See Note 7, Fair Value Disclosures and Note 22, Commitments, Contingencies and Guarantees for additional disclosures about derivative instruments.)

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 master netting agreements and collateral arrangements with counterparties. These agreements provide us with the ability to offset a counterparty’s rights and obligations, request additional collateral when necessary or liquidate the collateral in the event of counterparty default.

The following tables present the fair value and related number of derivative contracts at November 30, 2013 and 2012 categorized by type of derivative contract. Prior to November 30, 2013, the fair value of forward purchase and sale contracts of to-be-announced securities were presented within Financial instruments owned – Mortgage- and asset-backed securities and Financial instruments sold, not yet purchased – Mortgage- and asset-backed securities. As of November 30, 2013, such contracts are presented within Financial instruments owned – Derivatives and Financial instruments sold, not yet purchased – Derivatives as interest rate contracts and Interest rate swaps, forwards and options with the impact of counterparty netting reflected as applicable under generally accepted accounting principles. Financial information presented as of November 30, 2012 has been conformed to this presentation. The fair value of assets/liabilities related to derivative contracts represents our receivable/payable for derivative financial instruments, gross of counterparty netting and cash collateral received and pledged (in thousands, except contract amounts):

	Successor
	November 30, 2013
	Assets				Liabilities
	Fair Value		Number of Contracts		Fair Value		Number of Contracts
Interest rate contracts	$	1,165,976		63,967	$	1,131,166		77,338
Foreign exchange contracts		653,772		118,707		693,658		112,417
Equity contracts		501,784		1,742,343		474,985		1,800,603
Commodity contracts		141,280		797,529		173,119		788,717
Credit contracts: centrally cleared swaps		49,531		49		51,632		46
Credit contracts: other credit derivatives		2,339		16		8,130		19
Total		2,514,682				2,532,690
Counterparty/cash-collateral netting		(2,253,589)				(2,352,611)
Total per Consolidated Statement of Financial Condition	$	261,093			$	180,079

	Predecessor
	November 30, 2012
	Assets				Liabilities
	Fair Value		Number of Contracts		Fair Value		Number of Contracts
Interest rate contracts	$	1,053,974		69,966	$	1,134,620		92,586
Foreign exchange contracts		387,325		118,958		357,277		116,758
Equity contracts		577,964		1,526,127		528,979		1,396,213
Commodity contracts		265,703		754,987		278,660		728,696
Credit contracts		4,448		13		11,301		40
Total		2,289,414				2,310,837
Counterparty/cash-collateral netting		(1,921,122)				(2,068,750)
Total per Consolidated Statement of Financial Condition	$	368,292			$	242,087

The following table presents unrealized and realized gains (losses) on derivative contracts for the nine months ended November 30, 2013, three months ended February 28, 2013 and for the years ended November 30, 2012 and 2011 (in thousands):

	Successor		Predecessor
Gains (Losses)	Nine Months Ended   November 30, 2013		Three Months Ended   February 28, 2013		Year Ended   November 30, 2012		Year Ended   November 30, 2011
Interest rate contracts	$	132,661	$	38,936	$	(35,524)	$	(204,403)
Foreign exchange contracts		4,937		11,895		9,076		2,243
Equity contracts		3,783		(22,021)		(83,817)		(279,488)
Commodity contracts		45,546		19,585		77,285		74,282
Credit contracts		(12,850)		(3,742)		(20,059)		17,621
Total	$	174,077	$	44,653	$	(53,039)	$	(389,745)

OTC Derivatives.    The following tables set forth by remaining contract maturity the fair value of OTC derivative assets and liabilities as of November 30, 2013 (in thousands):

	Successor OTC Derivative Assets (1) (2) (4)
	0 – 12 Months		1 – 5 Years		Greater Than   5 Years		Cross-Maturity  Netting (3)		Total
Commodity swaps, options and forwards	$	43,519	$	699	$	-	$	(198)	$	44,020
Credit default swaps		-		-		413				413
Equity swaps and options		4,394		-		-		-		4,394
Total return swaps		948		-		-		-		948
Foreign currency forwards, swaps and options		89,072		37,798		52		(11,192)		115,730
Interest rate swaps, options and forwards		96,983		89,255		128,983		(51,990)		263,231
Total	$	234,916	$	127,752	$	129,448	$	(63,380)		428,736
Cross product counterparty netting										(2,086)
Total OTC derivative assets included in Financial instruments owned									$	426,650

(1) At November 30, 2013, we held exchange traded derivative assets and other credit agreements with a fair value of $43.1 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 on the Consolidated Statements of Financial Condition. At November 30, 2013, cash collateral received was $208.6 million.

(3) Amounts represent the netting of receivable balances with payable balances for the same counterparty within product category across maturity categories.

(4) Derivative fair values include counterparty netting within product category.

	Successor OTC Derivative Liabilities (1) (2) (4)
	0 – 12 Months		1 – 5 Years		Greater Than   5 Years		Cross-Maturity  Netting (3)		Total
Commodity swaps, options and forwards	$	69,380	$	203	$	-	$	(198)	$	69,385
Credit default swaps		174		3,539		1,263		-		4,976
Equity swaps and options		-		-		3,332		-		3,332
Total return swaps		5,002		-		-		-		5,002
Foreign currency forwards, swaps and options		117,044		47,258		-		(8,608)		155,694
Interest rate swaps, options and forwards		24,142		124,352		136,683		(51,990)		233,187
Total	$	215,742	$	175,352	$	141,278	$	(60,796)		471,576
Cross product counterparty netting										(2,086)
Total OTC derivative liabilities included in Financial instruments sold, not yet purchased									$	469,490

(1) At November 30, 2013, we held exchange traded derivative liabilities and other credit agreements with a fair value of $18.2 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 on the Consolidated Statements of Financial Condition. At November 30, 2013, cash collateral pledged was $307.7 million.

(3) Amounts represent the netting of receivable balances with payable balances for the same counterparty within product category across maturity categories.

(4) Derivative fair values include counterparty netting within product category.

At November 30, 2013, the counterparty credit quality with respect to the fair value of our OTC derivatives assets was as follows (in thousands):

Counterparty credit quality (1):
A- or higher	$	251,967
BBB- to BBB+		18,541
BB+ or lower		95,072
Unrated		61,070
Total	$	426,650

(1) We utilize internal credit ratings determined by our Risk Management. Credit ratings determined by Risk Management use methodologies that produce ratings generally consistent with those produced by external rating agencies.

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 aggregate fair value of all derivative instruments with such credit-risk-related contingent features that are in a liability position at November 30, 2013 and 2012 is $170.2 million and $164.8 million, respectively, for which we have posted collateral of $127.7 million and $129.2 million, respectively, in the normal course of business. If the credit-risk-related contingent features underlying these agreements were triggered on November 30, 2013 and 2012, we would have been required to post an additional $49.4 million and $38.1 million, respectively, of collateral to our counterparties.