Derivative Financial Instruments (Tables)

3 Months Ended

Mar. 31, 2018

Derivative Instruments and Hedging Activities Disclosure [Abstract]

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

The following table presents the fair value and related number of derivative contracts categorized by type of derivative contract as reflected in the Consolidated Statements of Financial Condition at March 31, 2018 and December 31, 2017. 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 our 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	Fair Value			Number of Contracts
March 31, 2018
Derivatives designated as accounting hedges - interest rate contracts	$	—		—	$	28,269		1

Derivatives not designated as accounting hedges:
Interest rate contracts	$	799,940		38,814	$	948,742		12,655
Foreign exchange contracts	307,337			5,695	299,953			4,470
Equity contracts	1,432,656			2,494,701	2,222,854			2,040,074
Commodity contracts	5,207			5,801	14,066			6,881
Credit contracts	26,525			146	24,185			105
Total	2,571,665				3,509,800
Counterparty/cash-collateral netting (1)	(2,414,276		)		(2,655,358		)
Total derivatives not designated as accounting hedges	$	157,389			$	854,442

Total per Consolidated Statement of Financial Condition (2)	$	157,389			$	882,711

December 31, 2017
Derivatives designated as accounting hedges - interest rate contracts	$	—		—	$	2,420		1

Derivatives not designated as accounting hedges:
Interest rate contracts	$	1,717,058		38,941	$	1,708,776		12,828
Foreign exchange contracts	366,541			6,463	349,512			4,612
Equity contracts	1,373,016			2,728,750	1,638,258			2,118,526
Commodity contracts	3,093			7,249	5,141			6,047
Credit contracts	38,261			130	41,801			191
Total	3,497,969				3,743,488
Counterparty/cash-collateral netting (1)(3)	(3,318,481		)		(3,490,514		)
Total derivatives not designated as accounting hedges	$	179,488			$	252,974

Total per Consolidated Statement of Financial Condition (2)(3)	$	179,488			$	255,394


(1)	Amounts netted include both netting by counterparty and for cash collateral paid or received.


(2)	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.

(3)

Pursuant to a rule change by the London Clearing House in the first fiscal quarter of 2018, variation margin exchanged each day with this clearing organization on certain interest rate derivatives is characterized as settlement payments as opposed to cash posted as collateral. The impact of this rule change would have been a reduction in gross interest rate derivative assets and liabilities as of December 31, 2017 of approximately $800 million, and a corresponding decrease in counterparty and cash collateral netting, with no impact to our Consolidated Statement 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 in the Consolidated Statements of Operations on a fair value hedge (in thousands):



	For the Three Months Ended March 31,
	For the Three Months Ended March 31,
	2018			2017
Interest rate swaps	$	(21,221	)	$	(4,609	)
Long-term debt	22,715			5,405
Total	$	1,494		$	796

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 March 31,
	For the Three Months Ended March 31,
	2018			2017
Interest rate contracts	$	26,962		$	9,678
Foreign exchange contracts	3,128			2,503
Equity contracts	(205,146		)	(178,622		)
Commodity contracts	(6,156		)	7,248
Credit contracts	(991		)	10,192
Total	$	(182,203	)	$	(149,001	)

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 March 31, 2018 (in thousands):



	OTC Derivative Assets (1) (2) (3)
	0-12 Months		1-5 Years		Greater Than 5 Years		Cross- Maturity Netting (4)			Total
Equity swaps and options	$	1,156	$	6,907	$	3,436	$	(3,177	)	$	8,322
Credit default swaps	—		12,996		—		—			12,996
Total return swaps	28,882		5,843		—		(1,595		)	33,130
Foreign currency forwards, swaps and options	56,730		561		—		(551		)	56,740
Fixed income forwards	39		—		—		—			39
Interest rate swaps, options and forwards	31,049		98,340		84,770		(86,162		)	127,997
Total	$	117,856	$	124,647	$	88,206	$	(91,485	)	239,224
Cross product counterparty netting										(20,558		)
Total OTC derivative assets included in Trading assets										$	218,666


(1)	At March 31, 2018, we held exchange traded derivative assets, other derivative assets and other credit agreements with a fair value of $66.3 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 March 31, 2018, cash collateral received was $127.6 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
Commodity swaps, options and forwards	$	5,632	$	1,121	$	—	$	—		$	6,753
Equity swaps and options	15,297		170,529		7,234		(3,177		)	189,883
Credit default swaps	31		8,994		—		—			9,025
Total return swaps	46,255		115,708		—		(1,595		)	160,368
Foreign currency forwards, swaps and options	49,723		374		—		(551		)	49,546
Fixed income forwards	4,669		—		—		—			4,669
Interest rate swaps, options and forwards	37,996		127,317		227,911		(86,162		)	307,062
Total	$	159,603	$	424,043	$	235,145	$	(91,485	)	727,306
Cross product counterparty netting										(20,558		)
Total OTC derivative liabilities included in Trading liabilities										$	706,748


(1)	At March 31, 2018, we held exchange traded derivative liabilities, other derivative liabilities and other credit agreements with a fair value of $544.6 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 March 31, 2018, cash collateral pledged was $368.7 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 March 31, 2018, 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	$	163,170
BBB- to BBB+	12,292
BB+ or lower	30,322
Unrated	12,882
Total	$	218,666


(1)	Jefferies utilizes internal credit ratings determined by the Jefferies 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

The external credit ratings of the underlyings or referenced assets for our written credit related derivative contracts (in millions):



	External Credit Rating
	Investment Grade		Non-investment grade		Total Notional
March 31, 2018
Credit protection sold:
Index credit default swaps	$	105.0	$	71.5	$	176.5
Single name credit default swaps	$	42.7	$	30.6	$	73.3

December 31, 2017
Credit protection sold:
Index credit default swaps	$	3.0	$	126.0	$	129.0
Single name credit default swaps	$	129.1	$	89.1	$	218.2

- Definition

Tabular disclosure of credit derivatives which includes information by sellers of credit derivatives, about each credit derivative, or each group of similar credit derivatives, including (a) the nature of the credit derivative - its term, how it arose, the events or circumstances that would require the seller to perform under the credit derivative, and the current status of the payment/performance risk of the credit derivative; (b) the maximum potential amount of future payments (undiscounted) the seller could be required to make under the credit derivative; (c) the current fair value of the credit derivative; and (d) the nature of any recourse provisions under the credit derivative, and any assets held either as collateral or by third parties. A credit derivative is a derivative instrument (1) in which one or more of its underlyings are related to the credit risk of a specified entity (or a group of entities) or an index based on the credit risk of a group of entities and (2) that exposes the seller to potential loss from credit-risk-related events specified in the contract. Examples of credit derivatives within the scope of this paragraph include, but are not limited to, credit default swaps, credit spread options, and credit index products; also includes a hybrid instrument that has an embedded credit derivative (for example, but not limited to, a credit-linked note).

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