Derivative Financial Instruments (Tables)

9 Months Ended

Aug. 31, 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 August 31, 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)
August 31, 2020 (1)
Derivatives designated as accounting hedges:
Interest rate contracts:
Cleared OTC	$	70,159	1	$	—	—
Foreign exchange contracts:
Bilateral OTC	—		—	393		2
Total derivatives designated as accounting hedges	70,159			393
Derivatives not designated as accounting hedges:
Interest rate contracts:
Exchange-traded	781		48,453	73		69,918
Cleared OTC	75,125		3,894	168,467		4,199
Bilateral OTC	689,581		1,480	316,196		621
Foreign exchange contracts:
Exchange-traded	—		—	—		245
Bilateral OTC	416,298		13,561	391,542		13,450
Equity contracts:
Exchange-traded	507,083		906,465	517,384		775,309
Bilateral OTC	351,744		1,939	879,876		1,945
Commodity contracts:
Exchange-traded	—		2,073	—		1,503
Bilateral OTC	25,447		2,287	—		—
Credit contracts:
Cleared OTC	3,165		15	5,567		13
Bilateral OTC	2,116		11	3,518		10
Total derivatives not designated as accounting hedges	2,071,340			2,282,623
Total gross derivative assets/liabilities:
Exchange-traded	507,864			517,457
Cleared OTC	148,449			174,034
Bilateral OTC	1,485,186			1,591,525
Amounts offset in Consolidated Statement of Financial Condition (3):
Exchange-traded	(504,400)			(504,400)
Cleared OTC	(144,200)			(145,706)
Bilateral OTC	(963,215)			(1,149,575)
Net amounts in the Consolidated Statement of Financial Condition (4)	$	529,684		$	483,335

(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				For the Nine Months Ended
	August 31, 2020		August 31, 2019		August 31, 2020		August 31, 2019
Interest rate swaps	$	834	$	28,052	$	47,303	$	69,843
Long-term debt	1,634		(28,519)		(45,539)		(72,288)
Total	$	2,468	$	(467)	$	1,764	$	(2,445)

The following table provides information related to gains (losses) on net investment hedges recognized in Net unrealized foreign exchange gains (losses), a component of Other comprehensive income (loss), in the Consolidated Statements of Comprehensive Income (Loss) (in thousands):

	For the Three Months Ended				For the Nine Months Ended
	August 31, 2020		August 31, 2019		August 31, 2020		August 31, 2019
Foreign exchange contracts	$	(393)	$	—	$	(393)	$	—
Total	$	(393)	$	—	$	(393)	$	—

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				For the Nine Months Ended
	August 31, 2020		August 31, 2019		August 31, 2020		August 31, 2019
Interest rate contracts	$	(35,462)	$	(89,864)	$	(40,630)	$	(193,715)
Foreign exchange contracts	4,418		(1,839)		2,534		269
Equity contracts	(32,782)		2,236		113,253		(118,354)
Commodity contracts	(18,716)		2,285		42,049		4,057
Credit contracts	(179)		2,687		14,205		11,600
Total	$	(82,721)	$	(84,495)	$	131,411	$	(296,143)

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 August 31, 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	$	18,611	$	6,836	$	—	$	—	$	25,447
Equity options and forwards	21,437		44,672		15,160		(25,445)		55,824
Total return swaps	74,923		19,764		2,872		(14,666)		82,893
Foreign currency forwards, swaps and options	63,570		28,993		—		(4,477)		88,086
Interest rate swaps, options and forwards	94,956		204,309		222,482		(45,025)		476,722
Total	$	273,497	$	304,574	$	240,514	$	(89,613)	728,972
Cross product counterparty netting									(22,759)
Total OTC derivative assets included in Financial instruments owned, at fair value									$	706,213

(1)At August 31, 2020, we held net exchange-traded derivative assets, other derivative assets and other credit agreements with a fair value of $25.1 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 in the Consolidated Statements of Financial Condition. At August 31, 2020, cash collateral received was $201.6 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
Equity options and forwards	$	15,474	$	370,915	$	156,839	$	(25,445)	$	517,783
Credit default swaps	12		1,108		—		—		1,120
Total return swaps	58,888		103,567		—		(14,666)		147,789
Foreign currency forwards, swaps and options	55,541		11,792		34		(4,477)		62,890
Fixed income forwards	1,404		—		—		—		1,404
Interest rate swaps, options and forwards	42,132		80,469		72,462		(45,025)		150,038
Total	$	173,451	$	567,851	$	229,335	$	(89,613)	881,024
Cross product counterparty netting									(22,759)
Total OTC derivative liabilities included in Financial instruments sold, not yet purchased, at fair value									$	858,265

(1)At August 31, 2020, we held net exchange-traded derivative liabilities, other derivative liabilities and other credit agreements with a fair value of $14.5 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 August 31, 2020, cash collateral pledged was $389.5 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 August 31, 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	$	139,436
BBB- to BBB+	15,949
BB+ or lower	353,564
Unrated	197,264
Total	$	706,213

(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
August 31, 2020
Credit protection sold:
Index credit default swaps	$	2.0	$	45.9	$	—	$	47.9
Single name credit default swaps	—		6.2		0.2		6.4
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).

	August 31, 2020		November 30, 2019
Derivative instrument liabilities with credit-risk-related contingent features	$	191.4	$	42.9
Collateral posted	(120.6)		(3.1)
Collateral received	64.5		114.1
Return of and additional collateral required in the event of a credit rating downgrade below investment grade (1)	135.3		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.