Derivative Financial Instruments
 6 Months Ended
May 31, 2022
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
Derivative Financial Instruments Derivative Financial Instruments
Derivative Financial Instruments
Our derivative activities are recorded at fair value in our Consolidated Statements of Financial Condition 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 resulting from our trading activities. 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.
See Note 3, Fair Value Disclosures, and Note 15, Commitments, Contingencies and Guarantees, 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 International Swaps and Derivatives Association, Inc. master netting agreements or similar agreements with counterparties. See Note 2, Summary of Significant Accounting Policies, in our consolidated financial statements included in Part II, Item 8 of our Annual Report on Form 10-K for the year ended November 30, 2021 for additional information regarding the offsetting of derivative contracts.
The following tables present the fair value and related number of derivative contracts at May 31, 2022 and November 30, 2021 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 our Consolidated Statements of Financial Condition as appropriate under U.S. 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).
May 31, 2022 (1)
AssetsLiabilities
Fair ValueNumber of Contracts (2)Fair ValueNumber of Contracts (2)
Derivatives designated as accounting hedges:
Interest rate contracts:
Cleared OTC
$— — $152,090 3 
Foreign exchange contracts:
Bilateral OTC
51,845 5 — — 
Total derivatives designated as accounting hedges
51,845 152,090 
Derivatives not designated as accounting hedges:
Interest rate contracts:
Exchange-traded
9,052 76,999 2,015 41,098 
Cleared OTC
691,397 3,974 541,001 3,875 
Bilateral OTC
528,364 819 944,289 851 
Foreign exchange contracts:
Bilateral OTC
500,922 11,847 512,817 11,879 
Equity contracts:
Exchange-traded
1,005,732 1,363,436 766,134 1,397,278 
Bilateral OTC
281,493 4,656 1,122,597 5,305 
Commodity contracts:
Exchange-traded
66 1,365 36 1,534 
Credit contracts:
Cleared OTC
32,646 95 41,949 95 
Bilateral OTC
34,999 14 37,235 13 
Total derivatives not designated as accounting hedges
3,084,671 3,968,073 
Total gross derivative assets/ liabilities:
Exchange-traded
1,014,850 768,185 
Cleared OTC
724,043 735,040 
Bilateral OTC
1,397,623 2,616,938 
Amounts offset in our Consolidated Statements of Financial Condition (3):
Exchange-traded
(764,932)(764,932)
Cleared OTC
(719,960)(735,040)
Bilateral OTC
(1,243,524)(1,384,564)
Net amounts per Consolidated Statements of Financial Condition (4)
$408,100 $1,235,627 
(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 from/Payables to brokers, dealers and clearing organizations in our 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 our Consolidated Statements of Financial Condition.
November 30, 2021 (1)
AssetsLiabilities
Fair ValueNumber of Contracts (2)Fair ValueNumber of Contracts (2)
Derivatives designated as accounting hedges:
Interest rate contracts:
Cleared OTC
$35,726 2 $32,200 1 
Foreign exchange contracts:
Bilateral OTC
30,462 4 — — 
Total derivatives designated as accounting hedges
66,188 32,200 
Derivatives not designated as accounting hedges:
Interest rate contracts:
Exchange-traded
1,262 23,888 756 39,195 
Cleared OTC
373,355 4,505 367,134 4,467 
Bilateral OTC
322,353 1,037 283,481 967 
Foreign exchange contracts:
Bilateral OTC
1,428,712 17,792 1,437,116 17,576 
Equity contracts:
Exchange-traded
1,206,606 1,582,713 1,036,019 1,450,624 
Bilateral OTC
377,132 2,888 1,824,418 2,682 
Commodity contracts:
Exchange-traded
448 1,394 223 1,457 
Bilateral OTC— 1 — — 
Credit contracts:
Cleared OTC
84,180 132 108,999 128 
Bilateral OTC
13,289 14 14,168 17 
Total derivatives not designated as accounting hedges
3,807,337 5,072,314 
Total gross derivative assets/liabilities:
Exchange-traded
1,208,316 1,036,998 
Cleared OTC
493,261 508,333 
Bilateral OTC
2,171,948 3,559,183 
Amounts offset in our Consolidated Statements of Financial Condition (3):
Exchange-traded
(1,008,091)(1,008,091)
Cleared OTC
(483,339)(508,333)
Bilateral OTC
(1,813,136)(2,184,586)
Net amounts per Consolidated Statements of Financial Condition (4)
$568,959 $1,403,504 
(1)Exchange-traded derivatives include derivatives executed on an organized exchange. Cleared OTC derivatives include derivatives executed bilaterally and subsequently novated to and cleared through central clearing counterparties. Bilateral OTC derivatives include derivatives executed and settled bilaterally without the use of an organized exchange or central clearing counterparty.
(2)Number of exchange-traded contracts may include open futures contracts. The unsettled fair value of these futures contracts is included in Receivables from/Payables to brokers, dealers and clearing organizations in our Consolidated Statements of Financial Condition.
(3)Amounts netted include both netting by counterparty and for cash collateral paid or received.
(4)We have not received or pledged additional collateral under master netting agreements and/or other credit support agreements that is eligible to be offset beyond what has been offset in our Consolidated Statements of Financial Condition.
The following table provides information related to gains (losses) recognized in Interest expense in our Consolidated Statements of Earnings related to fair value hedges (in thousands):
Three Months Ended 
May 31,		Six Months Ended 
May 31,
Gains (Losses)2022202120222021
Interest rate swaps$(100,415)$(1,671)$(144,413)$(45,462)
Long-term debt105,041 5,215 155,583 52,026 
Total$4,626 $3,544 $11,170 $6,564 
The following table provides information related to gains (losses) on our net investment hedges recognized in Currency translation and other adjustments, a component of Other comprehensive income (loss), in our Consolidated Statements of Comprehensive Income (in thousands):
Three Months Ended 
May 31,		Six Months Ended 
May 31,
Gains (Losses)2022202120222021
Foreign exchange contracts$73,498 $(21,906)$62,560 $(63,406)
Total$73,498 $(21,906)$62,560 $(63,406)
The following table presents unrealized and realized gains (losses) on derivative contracts recognized in Principal transactions revenues in our Consolidated Statements of Earnings, which are utilized in connection with our client activities and our economic risk management activities (in thousands):
Three Months Ended 
May 31,		Six Months Ended 
May 31,
Gains (Losses)2022202120222021
Interest rate contracts$(87,871)$21,364 $(129,463)$(20,760)
Foreign exchange contracts(112,157)24,243 (109,533)71,273 
Equity contracts(16,776)(3,315)194,161 (93,012)
Commodity contracts2,232 1,754 424 2,563 
Credit contracts7,013 (2,864)11,445 (2,043)
Total$(207,559)$41,182 $(32,966)$(41,979)
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 at May 31, 2022 (in thousands):
OTC Derivative Assets (1) (2) (3)
0 – 12 Months1 – 5 YearsGreater Than 5 YearsCross-Maturity Netting (4)Total
Equity options and forwards
$15,292 $3,514 $— $(14,945)$3,861 
Credit default swaps
— 8 4,177 (8)4,177 
Total return swaps
69,436 39,246 46 (9,812)98,916 
Foreign currency forwards, swaps and options
120,957 3,836 284 (3,128)121,949 
Fixed income forwards
30,634 — — — 30,634 
Interest rate swaps, options and forwards
67,393 351,584 29,597 (114,610)333,964 
Total
$303,712 $398,188 $34,104 $(142,503)593,501 
Cross product counterparty netting
(19,797)
Total OTC derivative assets included in Financial instruments owned
$573,704 
(1)At May 31, 2022, we held net exchange-traded derivative assets and other credit agreements with a fair value of $249.9 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 our Consolidated Statements of Financial Condition. At May 31, 2022, cash collateral received was $415.5 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.
OTC Derivative Liabilities (1) (2) (3)
0 – 12 Months1 – 5 YearsGreater Than 5 YearsCross-Maturity Netting (4)Total
Equity options and forwards
$78,364 $393,463 $22,849 $(14,945)$479,731 
Credit default swaps
— 594 8,717 (8)9,303 
Total return swaps
387,018 122,606 100 (9,812)499,912 
Foreign currency forwards, swaps and options
81,886 3,192 49 (3,128)81,999 
Fixed income forwards
845 — — — 845 
Interest rate swaps, options and forwards
64,166 351,796 428,428 (114,610)729,780 
Total
$612,279 $871,651 $460,143 $(142,503)1,801,570 
Cross product counterparty netting
(19,797)
Total OTC derivative liabilities included in Financial instruments sold, not yet purchased
$1,781,773 
(1)At May 31, 2022, we held net exchange-traded derivative liabilities and other credit agreements with a fair value of $25.5 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 our Consolidated Statements of Financial Condition. At May 31, 2022, cash collateral pledged was $571.6 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.
The following table presents the counterparty credit quality with respect to the fair value of our OTC derivative assets at May 31, 2022 (in thousands):
Counterparty credit quality (1):
A- or higher$371,914 
BBB- to BBB+36,799 
BB+ or lower73,680 
Unrated91,311 
Total$573,704 
(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
The external credit ratings of the underlyings or referenced assets for our written credit related derivative contracts (in millions):
May 31, 2022
External Credit Rating
Investment GradeNon-investment GradeUnratedTotal Notional
Credit protection sold:
Index credit default swaps
$2,428.4 $898.9 $— $3,327.3 
Single name credit default swaps
— — 0.2 0.2 
November 30, 2021
External Credit Rating
Investment GradeNon-investment GradeUnratedTotal Notional
Credit protection sold:
Index credit default swaps
$2,612.0 $1,298.8 $— $3,910.8 
Single name credit default swaps
— 17.6 0.2 17.8 
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):
May 31, 2022November 30, 2021
Derivative instrument liabilities with credit-risk-related contingent features
$411.7 $821.5 
Collateral posted(112.6)(160.5)
Collateral received138.0 369.3 
Return of and additional collateral required in the event of a credit rating downgrade below investment grade (1)
437.1 1,030.4 
(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.