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Derivative Financial Instruments
 12 Months Ended
Nov. 30, 2019
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
Derivative Financial Instruments Derivative Financial Instruments
Derivative Financial Instruments
Derivative activities are recorded at fair value in the Consolidated Statements of Financial Condition in Trading assets and Trading liabilities, 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. Predominantly, we 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. In addition, we apply hedge accounting to an interest rate swap that has been designated as a fair value hedge of the changes in fair value due to the benchmark interest rate for certain fixed rate senior long-term debt. See Notes 5 and 23 for additional disclosures about derivative financial 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 ISDA master netting agreements or similar agreements with counterparties. See Note 2 for additional information regarding the offsetting of derivative contracts.
The following tables present the fair value and related number of derivative contracts at November 30, 2019 and 2018 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)
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 per Consolidated Statement of Financial Condition (4)
$
418,408

 
 
 
$
527,205

 
 
 
Assets
 
Liabilities
 
Fair Value
 
Number of
Contracts (2)
 
Fair Value
 
Number of
Contracts (2)
November 30, 2018 (1)
 
 
 
 
 
 
 
Derivatives designated as accounting hedges:
 
 
 
 
 
 
 
Interest rate contracts:
 
 
 
 
 
 
 
Cleared OTC
$
—

 
—

 
$
29,647

 
1

Total derivatives designated as accounting hedges
—

 
 
 
29,647

 
 
 
 
 
 
 
 
 
 
Derivatives not designated as accounting hedges:
 
 
 
 
 
 
 
Interest rate contracts:
 
 
 
 
 
 
 
Exchange-traded
924

 
32,159

 
513

 
66,095

Cleared OTC
422,670

 
2,095

 
411,833

 
2,394

Bilateral OTC
372,899

 
1,398

 
491,697

 
816

Foreign exchange contracts:
 
 
 
 
 
 
 
Exchange-traded
42

 
538

 
2

 
690

Cleared OTC
—

 
—

 
36

 
3

Bilateral OTC
311,228

 
9,548

 
314,951

 
9,909

Equity contracts:
 
 
 
 
 
 
 
Exchange-traded
1,202,927

 
2,104,684

 
2,061,137

 
1,779,836

Bilateral OTC
207,221

 
5,126

 
315,996

 
2,764

Commodity contracts:
 
 
 
 
 
 
 
Exchange-traded
27,632

 
7,272

 
272

 
4,185

Bilateral OTC
10,191

 
1,274

 
1,445

 
1,498

Credit contracts:
 
 
 
 
 
 
 
Cleared OTC
11,204

 
7

 
1,556

 
14

Bilateral OTC
13,768

 
123

 
11,618

 
79

Total derivatives not designated as accounting hedges
2,580,706

 
 

 
3,611,056

 
 

 
 
 
 
 
 
 
 
Total gross derivative assets/ liabilities:
 
 
 
 
 
 
 
Exchange-traded
1,231,525

 
 
 
2,061,924

 
 
Cleared OTC
433,874

 
 
 
443,072

 
 
Bilateral OTC
915,307

 
 
 
1,135,707

 
 
 
 
 
 
 
 
 
 
Amounts offset in Consolidated Statement of Financial Condition (3):
 
 
 
 
 
 
 
Exchange-traded
(1,190,951
)
 
 
 
(1,190,951
)
 
 
Cleared OTC
(407,351
)
 
 
 
(418,779
)
 
 
Bilateral OTC
(815,629
)
 
 
 
(903,320
)
 
 
Net amounts per Consolidated Statement of Financial Condition (4)
$
166,775

 
 
 
$
1,127,653

 
 

(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.

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):
 
Twelve Months Ended November 30, 2019
 
Eleven Months Ended November 30, 2018
 
Twelve Months Ended December 31, 2017
 
 
 
 
 
 
Interest rate swaps
$
56,385

 
$
(25,539
)
 
$
(2,091
)
Long-term debt
(58,931
)
 
27,363

 
8,124

Total
$
(2,546
)
 
$
1,824

 
$
6,033


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):
 
Twelve Months Ended November 30, 2019
 
Eleven Months Ended November 30, 2018
 
Twelve Months Ended December 31, 2017
 
 
 
 
 
 
Interest rate contracts
$
(188,605
)
 
$
67,291

 
$
3,171

Foreign exchange contracts
(822
)
 
226

 
4,376

Equity contracts
(108,961
)
 
(267,187
)
 
(319,775
)
Commodity contracts
(5,630
)
 
21,785

 
(9,049
)
Credit contracts
9,147

 
449

 
1,959

Total
$
(294,871
)
 
$
(177,436
)
 
$
(319,318
)


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.  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 November 30, 2019 (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
$
16,634

 
$
3,966

 
$
—

 
$
(391
)
 
$
20,209

Equity forwards, swaps and options
44,065

 
2,302

 
7,442

 
(6,612
)
 
47,197

Credit default swaps
49

 
1,059

 
15

 
(62
)
 
1,061

Total return swaps
58,845

 
34,546

 
—

 
(554
)
 
92,837

Foreign currency forwards, swaps and options
46,651

 
11,123

 
62

 
(4,855
)
 
52,981

Fixed income forwards
986

 
—

 
—

 
—

 
986

Interest rate swaps, options and forwards
33,147

 
163,818

 
142,277

 
(15,032
)
 
324,210

Total
$
200,377

 
$
216,814

 
$
149,796

 
$
(27,506
)
 
539,481

Cross product counterparty netting
 

 
 

 
 

 
 

 
(32,208
)
Total OTC derivative assets included in Trading assets
 

 
 

 
 

 
 

 
$
507,273


(1)
At November 30, 2019, we held exchange traded derivative assets, other derivatives assets and other credit agreements with a fair value of $37.2 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 November 30, 2019, cash collateral received was $126.1 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.
 
 
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
 
$
391

 
$
—

 
$
—

 
$
(391
)
 
$
—

Equity forwards, swaps and options
 
25,342

 
173,359

 
77,052

 
(6,612
)
 
269,141

Credit default swaps
 
1,245

 
3,688

 
8,160

 
(62
)
 
13,031

Total return swaps
 
28,096

 
41,160

 
—

 
(554
)
 
68,702

Foreign currency forwards, swaps and options
 
48,388

 
9,786

 
45

 
(4,855
)
 
53,364

Fixed income forwards
 
581

 
—

 
—

 
—

 
581

Interest rate swaps, options and forwards
 
20,881

 
93,730

 
104,318

 
(15,032
)
 
203,897

Total
 
$
124,924

 
$
321,723

 
$
189,575

 
$
(27,506
)
 
608,716

Cross product counterparty netting
 
 

 
 

 
 

 
 

 
(32,208
)
Total OTC derivative liabilities included in Trading liabilities
 
 

 
 

 
 

 
 

 
$
576,508


(1)
At November 30, 2019, we held exchange traded derivative liabilities, other derivative liabilities and other credit agreements with a fair value of $275.7 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 November 30, 2019, cash collateral pledged was $325.0 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.

At November 30, 2019, 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
$
127,355

BBB- to BBB+
31,536

BB+ or lower
193,338

Unrated
155,044

Total
$
507,273

(1)
We utilize internal credit ratings determined by the Jefferies Group 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 (in millions):
 
 
External Credit Rating
 
 
 
 
 
 
Investment Grade
 
Non-investment Grade
 
Unrated
 
Total Notional
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

 
 
 
 
 
 
 
 
 
November 30, 2018
 
 
 
 
 
 
 
 
Credit protection sold:
 
 
 
 
 
 
 
 
Index credit default swaps
 
$
25.7

 
$
167.4

 
$
—

 
$
193.1

Single name credit default swaps
 
57.7

 
84.5

 
3.0

 
145.2


Contingent Features
Certain of Jefferies Group's derivative instruments contain provisions that require its debt to maintain an investment grade credit rating from each of the major credit rating agencies. If Jefferies Group's 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 the 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 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 its counterparties if the credit-risk-related contingent features underlying these agreements were triggered (in millions):
 
November 30, 2019
 
November 30, 2018
 
 
 
 
Derivative instrument liabilities with credit-risk-related contingent features
$
42.9

 
$
93.5

Collateral posted
(3.1
)
 
(61.5
)
Collateral received
114.1

 
91.5

Return of and additional collateral required in the event of a credit rating downgrade below investment grade (1)
154.0

 
123.3

(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.

Other Derivatives

Vitesse Energy Finance uses swaps and call and put options in order to reduce exposure to future oil price fluctuations. Vitesse Energy Finance accounts for the derivative instruments at fair value. The gains and losses associated with the change in fair value of the derivatives are recorded in Other revenues.