Jefferies Financial Group Inc. - 10-Q filing on 2022-07-08

Fair Value Disclosures

6 Months Ended

May 31, 2022

The following is a summary of our financial assets and liabilities that are accounted for at fair value on a recurring basis, excluding Investments at fair value based on net asset value ("NAV") of $1.31 billion and $1.03 billion at May 31, 2022 and November 30, 2021, respectively, by level within the fair value hierarchy (in thousands):


	May 31, 2022
	Level 1		Level 2		Level 3		Counterparty and Cash Collateral Netting (1)		Total
Assets:
Financial instruments owned, at fair value:
Corporate equity securities	$	3,867,049	$	157,414	$	200,961	$	—	$	4,225,424
Corporate debt securities	—		3,231,505		20,813		—		3,252,318
Collateralized debt obligations and collateralized loan obligations	—		323,627		49,858		—		373,485
U.S. government and federal agency securities	2,549,972		32,268		—		—		2,582,240
Municipal securities	—		630,483		—		—		630,483
Sovereign obligations	1,061,291		1,001,175		—		—		2,062,466
Residential mortgage-backed securities	—		1,591,820		1,059		—		1,592,879
Commercial mortgage-backed securities	—		343,744		1,870		—		345,614
Other asset-backed securities	—		202,509		84,778		—		287,287
Loans and other receivables	—		2,824,872		137,752		—		2,962,624
Derivatives	9,495		3,100,255		26,919		(2,728,569)		408,100
Investments at fair value	—		4,311		163,844		—		168,155
FXCM term loan	—		—		51,880		—		51,880
Total financial instruments owned, at fair value, excluding investments at fair value based on NAV	$	7,487,807	$	13,443,983	$	739,734	$	(2,728,569)	$	18,942,955

Loans to and investments in associated companies	$	—	$	1,795	$	14,795	$	—	$	16,590
Securities received as collateral, at fair value	$	1,322	$	—	$	—	$	—	$	1,322

Liabilities:
Financial instruments sold, not yet purchased, at fair value:
Corporate equity securities	$	1,801,924	$	32,488	$	3,749	$	—	$	1,838,161
Corporate debt securities	—		2,308,815		401		—		2,309,216
U.S. government and federal agency securities	3,471,943		—		—		—		3,471,943
Sovereign obligations	1,371,769		902,107		—		—		2,273,876
Residential mortgage-backed securities	—		1,010		—		—		1,010
Commercial mortgage-backed securities	—		—		385		—		385
Loans	—		2,465,974		18,283		—		2,484,257
Derivatives	2,172		4,066,790		101,916		(2,884,689)		1,286,189
Total financial instruments sold, not yet purchased, at fair value	$	6,647,808	$	9,777,184	$	124,734	$	(2,884,689)	$	13,665,037

Other secured financings	$	—	$	—	$	2,362	$	—	$	2,362
Long-term debt	$	—	$	877,667	$	739,353	$	—	$	1,617,020
Obligation to return securities received as collateral, at fair value	$	1,322	$	—	$	—	$	—	$	1,322


	November 30, 2021
	Level 1		Level 2		Level 3		Counterparty and Cash Collateral Netting (1)		Total
Assets:
Financial instruments owned, at fair value:
Corporate equity securities	$	2,737,255	$	257,318	$	87,647	$	—	$	3,082,220
Corporate debt securities	—		3,836,341		11,803		—		3,848,144
Collateralized debt obligations and collateralized loan obligations	—		579,518		31,946		—		611,464
U.S. government and federal agency securities	3,045,295		68,784		—		—		3,114,079
Municipal securities	—		509,559		—		—		509,559
Sovereign obligations	899,086		654,199		—		—		1,553,285
Residential mortgage-backed securities	—		1,168,246		1,477		—		1,169,723
Commercial mortgage-backed securities	—		196,419		2,333		—		198,752
Other asset-backed securities	—		337,022		93,524		—		430,546
Loans and other receivables	—		3,363,050		135,239		—		3,498,289
Derivatives	4,429		3,861,551		10,248		(3,305,756)		570,472
Investments at fair value	—		11,369		154,373		—		165,742
FXCM term loan	—		—		50,455		—		50,455
Total financial instruments owned, at fair value, excluding investments at fair value based on NAV	$	6,686,065	$	14,843,376	$	579,045	$	(3,305,756)	$	18,802,730

Loans to and investments in associated companies	$	—	$	—	$	30,842	$	—	$	30,842
Securities received as collateral, at fair value	$	7,289	$	—	$	—	$	—	$	7,289

Liabilities:
Financial instruments sold, not yet purchased, at fair value:
Corporate equity securities	$	1,671,696	$	19,654	$	4,635	$	—	$	1,695,985
Corporate debt securities	—		2,111,777		482		—		2,112,259
U.S. government and federal agency securities	2,457,420		—		—		—		2,457,420
Sovereign obligations	935,801		593,040		—		—		1,528,841
Residential mortgage-backed securities	—		719		—		—		719
Commercial mortgage-backed securities	—		—		210		—		210
Loans	—		2,476,087		15,770		—		2,491,857
Derivatives	1,815		5,034,544		78,017		(3,702,200)		1,412,176
Total financial instruments sold, not yet purchased, at fair value	$	5,066,732	$	10,235,821	$	99,114	$	(3,702,200)	$	11,699,467

Other secured financings	$	—	$	76,883	$	25,905	$	—	$	102,788
Long-term debt	$	—	$	961,866	$	881,732	$	—	$	1,843,598
Obligation to return securities received as collateral, at fair value	$	7,289	$	—	$	—	$	—	$	7,289

(1)Represents counterparty and cash collateral netting across the levels of the fair value hierarchy for positions with the same counterparty.

The following is a description of the valuation basis, including valuation techniques and inputs, used in measuring our financial assets and liabilities that are accounted for at fair value on a recurring basis:

Corporate Equity Securities

•Exchange-Traded Equity Securities: Exchange-traded equity securities are measured based on quoted closing exchange prices, which are generally obtained from external pricing services, and are categorized within Level 1 of the fair value hierarchy, otherwise they are categorized within Level 2 of the fair value hierarchy. To the extent these securities are

actively traded, valuation adjustments are not applied.

•Non-Exchange-Traded Equity Securities: Non-exchange-traded equity securities are measured primarily using broker quotations, pricing data from external pricing services and prices observed from recently executed market transactions and are categorized within Level 2 of the fair value hierarchy. Where such information is not available, non-exchange-traded equity securities are categorized within Level 3 of the fair value hierarchy and measured using valuation techniques involving quoted prices of or market data for comparable companies, similar company ratios and multiples (e.g., price/Earnings before interest, taxes, depreciation and amortization ("EBITDA"), price/book value), discounted cash flow analyses and transaction prices observed from subsequent financing or capital issuance by Jefferies Group. When using pricing data of comparable companies, judgment must be applied to adjust the pricing data to account for differences between the measured security and the comparable security (e.g., issuer market capitalization, yield, dividend rate, geographical concentration).

•Equity Warrants: Non-exchange-traded equity warrants are measured primarily from observed prices on recently executed market transactions and broker quotations and are categorized within Level 2 of the fair value hierarchy. Where such information is not available, non-exchange-traded equity warrants are generally categorized within Level 3 of the fair value hierarchy and can be measured using third-party valuation services or the Black-Scholes model with key inputs impacting the valuation including the underlying security price, implied volatility, dividend yield, interest rate curve, strike price and maturity date.

Corporate Debt Securities

•Investment Grade Corporate Bonds: Investment grade corporate bonds are measured primarily using pricing data from external pricing services and broker quotations, where available, prices observed from recently executed market transactions and bond spreads or credit default swap spreads of the issuer adjusted for basis differences between the swap curve and the bond curve. Investment grade corporate bonds measured using these valuation methods are categorized within Level 2 of the fair value hierarchy. If broker quotes, pricing data or spread data is not available, alternative valuation techniques are used including cash flow models incorporating interest rate curves, single name or index credit default swap curves for comparable issuers and recovery rate assumptions. Investment grade corporate bonds measured using alternative valuation techniques are categorized within Level 2 or Level 3 of the fair value hierarchy and are a limited portion of our investment grade corporate bonds.

•High Yield Corporate and Convertible Bonds: A significant portion of our high yield corporate and convertible bonds are categorized within Level 2 of the fair value hierarchy and are measured primarily using broker quotations and pricing data from external pricing services, where available, and prices observed from recently executed market transactions of institutional size. Where pricing data is less observable, valuations are categorized within Level 3 of the fair value hierarchy and are based on pending transactions involving the issuer or comparable issuers, prices implied from an issuer's subsequent financing or recapitalization, models incorporating financial ratios and projected cash flows of the issuer and market prices for comparable issuers.

Collateralized Debt Obligations and Collateralized Loan Obligations

Collateralized debt obligations ("CDOs") and collateralized loan obligations ("CLOs") are measured based on prices observed from recently executed market transactions of the same or similar security or based on valuations received from third-party brokers or data providers and are categorized within Level 2 or Level 3 of the fair value hierarchy depending on the observability and significance of the pricing inputs. Valuation that is based on recently executed market transactions of similar securities incorporates additional review and analysis of pricing inputs and comparability criteria, including, but not limited to, collateral type, tranche type, rating, origination year, prepayment rates, default rates and loss severity.

U.S. Government and Federal Agency Securities

•U.S. Treasury Securities: U.S. Treasury securities are measured based on quoted market prices obtained from external pricing services and categorized within Level 1 of the fair value hierarchy.

•U.S. Agency Debt Securities: Callable and non-callable U.S. agency debt securities are measured primarily based on quoted market prices obtained from external pricing services and are generally categorized within Level 1 or Level 2 of the fair value hierarchy.

Municipal Securities

Municipal securities are measured based on quoted prices obtained from external pricing services, where available, or recently executed independent transactions of comparable size and are generally categorized within Level 2 of the fair value hierarchy.

Sovereign Obligations

Sovereign government obligations are measured based on quoted market prices obtained from external pricing services, where available, or recently executed independent transactions of comparable size. Sovereign government obligations, with consideration given to the country of issuance, are generally categorized within Level 1 or Level 2 of the fair value hierarchy.

Residential Mortgage-Backed Securities

•Agency Residential Mortgage-Backed Securities: Agency residential mortgage-backed securities include mortgage pass-through securities (fixed and adjustable rate), collateralized mortgage obligations and principal-only and interest-only (including inverse interest-only) securities. Agency residential mortgage-backed securities are generally measured using recent transactions, pricing data from external pricing services or expected future cash flow techniques that incorporate prepayment models and other prepayment assumptions to amortize the underlying mortgage loan collateral and are categorized within Level 2 or Level 3 of the fair value hierarchy. We use prices observed from recently executed transactions to develop market-clearing spread and yield assumptions. Valuation inputs with regard to the underlying collateral incorporate factors such as weighted average coupon, loan-to-value, credit scores, geographic location, maximum and average loan size, originator, servicer and weighted average loan age.

•Non-Agency Residential Mortgage-Backed Securities: The fair value of non-agency residential mortgage-backed securities is determined primarily using pricing data from external pricing services, where available, and discounted cash flow methodologies and securities are categorized within Level 2 or Level 3 of the fair value hierarchy based on the observability and significance of the pricing inputs used. Performance attributes of the underlying mortgage loans are evaluated to estimate pricing inputs, such as prepayment rates, default rates and the severity of credit losses. Attributes of the underlying mortgage loans that affect the pricing inputs include, but are not limited to, weighted average coupon; average and maximum loan size; loan-to-value; credit scores; documentation type; geographic location; weighted average loan age; originator; servicer; historical prepayment, default and loss severity experience of the mortgage loan pool; and delinquency rate. Yield curves used in the discounted cash flow models are based on observed market prices for comparable securities and published interest rate data to estimate market yields. In addition, broker quotes, where available, are also referenced to compare prices primarily on interest-only securities.

Commercial Mortgage-Backed Securities

•Agency Commercial Mortgage-Backed Securities: Government National Mortgage Association ("Ginnie Mae") project loan bonds are measured based on inputs corroborated from and benchmarked to observed prices of recent securitization transactions of similar securities with adjustments incorporating an evaluation of various factors, including prepayment speeds, default rates and cash flow structures. Federal National Mortgage Association ("Fannie Mae") Delegated Underwriting and Servicing ("DUS") mortgage-backed securities are generally measured by using prices observed from recently executed market transactions to estimate market-clearing spread levels for purposes of estimating fair value. Ginnie Mae project loan bonds and Fannie Mae DUS mortgage-backed securities are categorized within Level 2 of the fair value hierarchy.

•Non-Agency Commercial Mortgage-Backed Securities: Non-agency commercial mortgage-backed securities are measured using pricing data obtained from external pricing services, prices observed from recently executed market transactions or based on expected cash flow models that incorporate underlying loan collateral characteristics and performance. Non-agency commercial mortgage-backed securities are categorized within Level 2 or Level 3 of the fair value hierarchy depending on the observability of the underlying inputs.

Other Asset-Backed Securities

Other asset-backed securities include, but are not limited to, securities backed by automobile loans, credit card receivables, student loans and other consumer loans and are categorized within Level 2 or Level 3 of the fair value hierarchy. Valuations are primarily determined using pricing data obtained from external pricing services, broker quotes and prices observed from recently executed market transactions. In addition, recent transaction data from comparable deals is deployed to develop market clearing yields and cumulative loss assumptions. The cumulative loss assumptions are based on the analysis of the underlying collateral and comparisons to earlier deals from the same issuer to gauge the relative performance of the deal.

Loans and Other Receivables

•Corporate Loans: Corporate loans categorized within Level 2 of the fair value hierarchy are measured based on market consensus pricing service quotations. Where available, market price quotations from external pricing services are reviewed to ensure they are supported by transaction data. Corporate loans categorized within Level 3 of the fair value hierarchy are measured based on price quotations that are considered to be less transparent, for example, derived using market prices for debt securities of the same creditor and estimates of future cash flows incorporating assumptions regarding creditor default and recovery rates and consideration of the issuer's capital structure.

•Participation Certificates in Agency Residential Loans: Valuations of participation certificates in agency residential loans are based on observed market prices of recently executed purchases and sales of similar loans and data provider pricing. The loan participation certificates are categorized within Level 2 of the fair value hierarchy given the observability and volume of recently executed transactions and availability of data provider pricing.

•Project Loans and Participation Certificates in Ginnie Mae Project and Construction Loans: Valuations of participation certificates in Ginnie Mae project and construction loans are based on inputs corroborated from and benchmarked to observed prices of recent securitizations with similar underlying loan collateral to derive an implied spread. Securitization prices are adjusted to estimate the fair value of the loans to account for the arbitrage that is realized at the time of securitization. The measurements are categorized within Level 2 of the fair value hierarchy given the observability and volume of recently executed transactions.

•Consumer Loans and Funding Facilities: Consumer and small business whole loans and related funding facilities are valued based on observed market transactions and incorporating valuation inputs including, but not limited to, delinquency and default rates, prepayment rates, borrower characteristics, loan risk grades and loan age. These assets are categorized within Level 2 or Level 3 of the fair value hierarchy.

•Escrow and Claim Receivables: Escrow and claim receivables are categorized within Level 2 of the fair value hierarchy where fair value is based on recent observations in the same receivable. Escrow and claim receivables are categorized within Level 3 of the fair value hierarchy where fair value is estimated based on reference to market prices and implied yields of debt securities of the same or similar issuers.

Derivatives

•Listed Derivative Contracts: Listed derivative contracts that are actively traded are measured based on quoted exchange prices, broker quotes or vanilla option valuation models, such as Black-Scholes, using observable valuation inputs from the principal market or consensus pricing services. Exchange quotes and/or valuation inputs are generally obtained from external vendors and pricing services. Broker quotes are validated directly through observable and tradeable quotes. Listed derivative contracts that use exchange close prices are generally categorized within Level 1 of the fair value hierarchy. All other listed derivative contracts are generally categorized within Level 2 of the fair value hierarchy.

•Over-the-Counter ("OTC") Derivative Contracts: OTC derivative contracts are generally valued using models, whose inputs reflect assumptions that we believe market participants would use in valuing the derivative in a current transaction. Where available, valuation inputs are calibrated from observable market data. For many OTC derivative contracts, the valuation models do not involve material subjectivity as the methodologies do not entail significant judgment and the inputs to valuation models do not involve a high degree of subjectivity as the valuation model inputs are readily observable or can be derived from actively quoted markets. OTC derivative contracts are primarily categorized within Level 2 of the fair value hierarchy given the observability and significance of the inputs to the valuation models. Where significant inputs to the valuation are unobservable, derivative instruments are categorized within Level 3 of the fair value hierarchy.

OTC options include OTC equity, foreign exchange, interest rate and commodity options measured using various valuation models, such as Black-Scholes, with key inputs including the underlying security price, foreign exchange spot rate, commodity price, implied volatility, dividend yield, interest rate curve, strike price and maturity date. Discounted cash flow models are utilized to measure certain OTC derivative contracts including the valuations of our interest rate swaps, which incorporate observable inputs related to interest rate curves, valuations of our foreign exchange forwards and swaps, which incorporate observable inputs related to foreign currency spot rates and forward curves and valuations of our commodity swaps and forwards, which incorporate observable inputs related to commodity spot prices and forward curves. Credit default swaps include both index and single-name credit default swaps. Where available, external data is used in measuring index credit default swaps and single-name credit default swaps. For commodity and equity total return swaps, market prices are generally observable for the underlying asset and used as the basis for measuring the fair value of the derivative contracts. Total return swaps executed on other underlyings are measured based on valuations received from external pricing services.

•Oil Futures Derivatives: Vitesse Energy uses swaps and put options in order to reduce exposure to future oil price fluctuations. Vitesse Energy accounts for the derivative instruments at fair value, which are classified as either Level 1 or Level 2 within the fair value hierarchy. Fair values classified as Level 1 are measured based on quoted closing exchange prices obtained from external pricing services and Level 2 are determined under the income valuation technique using an option-pricing model that is based on directly or indirectly observable inputs.

Investments at Fair Value

Investments at fair value include investments in hedge funds and private equity funds, which are measured at the NAV of the funds, provided by the fund managers and are excluded from the fair value hierarchy. Investments at fair value also include direct equity investments in private companies, which are measured at fair value using valuation techniques internally or by third-party valuation services involving performance data, company ratios and multiples (e.g., price/EBITDA, price/book value) for comparable companies, discounted cash flow analyses and transaction prices observed for subsequent financing or capital issuance by the company. Direct equity investments in private companies are categorized within Level 2 or Level 3 of the fair value hierarchy.

The following tables present information about our investments in entities that have the characteristics of an investment company (in thousands):


	Fair Value (1)		Unfunded Commitments
May 31, 2022
Equity Long/Short Hedge Funds (2)	$	482,004	$	—
Equity Funds (3)	57,760		41,191
Commodity Fund (4)	25,461		—
Multi-asset Funds (5)	418,397		—
Other Funds (6)	321,378		15,963
Total	$	1,305,000	$	57,154

November 30, 2021
Equity Long/Short Hedge Funds (2)	$	466,231	$	—
Equity Funds (3)	46,030		17,815
Commodity Fund (4)	24,401		—
Multi-asset Funds (5)	390,224		—
Other Funds (6)	99,054		36,090
Total	$	1,025,940	$	53,905

(1)Where fair value is calculated based on NAV, fair value has been derived from each of the funds' capital statements.

(2)This category includes investments in hedge funds that invest, long and short, primarily in both public and private equity securities in domestic and international markets. At May 31, 2022 and November 30, 2021, approximately 63% and 74%, respectively, of the fair value of investments are redeemable quarterly with 90 days prior written notice on December 31, 2021. At May 31, 2022 and November 30, 2021, approximately 32% and 21%, respectively, of the fair value of investments in this category cannot be redeemed because these investments include restrictions that do not allow for redemption before November 30, 2023. The remaining investments are redeemable quarterly with 60 days prior written notice.

(3)The investments in this category include investments in equity funds that invest in the equity of various U.S. and foreign private companies in a broad range of industries. These investments cannot be redeemed; instead distributions are received through the liquidation of the underlying assets of the funds, which are primarily expected to be liquidated in approximately one to thirteen years.

(4)This category includes investments in a hedge fund that invests, long and short, primarily in commodities. These investments are redeemable quarterly with 60 days prior written notice.

(5)This category includes investments in hedge funds that invest, long and short, primarily in multi-asset securities in domestic and international markets in both the public and private sectors. At May 31, 2022 and November 30, 2021, investments representing approximately 77% and 78%, respectively, of the fair value of investments are redeemable monthly with 60 days prior written notice. At May 31, 2022 and November 30, 2021, approximately 16% and 22%, respectively, of the fair value of investments in this category are redeemable quarterly with 90 days prior written notice. At May 31, 2022, the remaining investments cannot be redeemed because these investments include restrictions that do not allow for redemption before April 1, 2024.

(6)This category includes investments in a fund that invests in short-term trade receivables and payables that are expected to generally be outstanding between 90 to 120 days and short-term credit instruments. This category also includes investments in a fund that invests in distressed and special situations long and short credit strategies across sectors and asset types. Investments in this category are redeemable quarterly with 90 days prior written notice.

Investment in FXCM

Our investment in FXCM and associated companies consists of a senior secured term loan due May 6, 2023 ($71.6 million principal outstanding at May 31, 2022), a 50% voting interest in FXCM and rights to a majority of all distributions in respect of the equity of FXCM. Our investment in the FXCM term loan is reported within Financial instruments owned, at fair value in the Consolidated Statements of Financial Condition. We classify our equity investment in FXCM in the Consolidated Statements of Financial Condition as Loans to and investments in associated companies, as we have the ability to significantly influence FXCM through our seats on the board of directors.

We estimate the fair value of our term loan by using a valuation model with inputs including management's assumptions concerning the amount and timing of expected cash flows, the loan's implied credit rating and effective yield. Because of these inputs and the degree of judgment involved, we have categorized our term loan within Level 3 of the fair value hierarchy.

Loans to and Investments in Associated Companies

Corporate bonds are measured primarily using pricing data from external pricing services and are categorized within Level 2 of the fair value hierarchy. Non-exchange-traded equity warrants with no pricing from external pricing services are generally categorized within Level 3 of the fair value hierarchy. The warrants are measured using the Black-Scholes model with key inputs impacting the valuation including the underlying security price, implied volatility, interest rate curve, strike price and maturity date.

Other Secured Financings

Other secured financings that are accounted for at fair value are classified within Level 2 or Level 3 of the fair value hierarchy. Fair value is based on estimates of future cash flows incorporating assumptions regarding recovery rates.

Securities Received as Collateral and Obligations to Return Securities Received as Collateral

In connection with securities-for-securities transactions in which we are the lender of securities and are permitted to sell or repledge the securities received as collateral, we report the fair value of the collateral received and the related obligation to return the collateral. Valuation is based on the price of the underlying security and is categorized within the corresponding leveling guidance above. These financial instruments are typically categorized within Level 1 of the fair value hierarchy.

Long-term Debt

Long-term debt includes variable rate, fixed-to-floating rate, equity-linked notes, constant maturity swap, digital and Bermudan structured notes. These are valued using various valuation models that incorporate Jefferies Group's own credit spread, market price quotations from external pricing sources referencing the appropriate interest rate curves, volatilities and other inputs as well as prices for transactions in a given note during the period. Long-term debt notes are generally categorized within Level 2 of the fair value hierarchy, where market trades have been observed during the period or model pricing is available, otherwise the notes are categorized within Level 3.

Level 3 Rollforwards

The following is a summary of changes in fair value of our financial assets and liabilities that have been categorized within Level 3 of the fair value hierarchy for the three months ended May 31, 2022 (in thousands):


	Balance, February 28, 2022		Total gains/ losses (realized and unrealized) (1)		Purchases		Sales		Settlements		Issuances		Net transfers into (out of) Level 3		Balance, May 31, 2022		Changes in unrealized gains/losses included in earnings relating to instruments still held at May 31, 2022 (1)
Assets:
Financial instruments owned, at fair value:
Corporate equity securities	$	113,922	$	35,581	$	67,540	$	(13,415)	$	—	$	—	$	(2,667)	$	200,961	$	35,361
Corporate debt securities	42,358		3,550		38,141		(47,025)		(12,604)		—		(3,607)		20,813		(849)
CDOs and CLOs	45,219		877		13,264		(28,037)		(1,466)		—		20,001		49,858		(1,798)
Sovereign obligations	23		—		—		—		—		—		(23)		—		—
Residential mortgage-backed securities	1,186		(47)		—		—		(80)		—		—		1,059		(17)
Commercial mortgage-backed securities	3,732		(439)		—		—		—		—		(1,423)		1,870		—
Other asset-backed securities	62,382		(781)		21,501		(1,688)		(12,296)		—		15,660		84,778		(1,065)
Loans and other receivables	137,942		(3,764)		15,598		(23,603)		(108)		—		11,687		137,752		(4,764)
Investments at fair value	169,508		1,576		37		—		(7,277)		—		—		163,844		1,576
FXCM term loan	50,335		1,545		—		—		—		—		—		51,880		1,545
Loans to and investments in associated companies	22,480		(7,685)		—		—		—		—		—		14,795		—

Liabilities:
Financial instruments sold, not yet purchased, at fair value:
Corporate equity securities	5,666		(234)		(1,533)		—		—		—		(150)		$	3,749	(350)
Corporate debt securities	7,308		(3,588)		(16,091)		14,584		—		—		(1,812)		401		5
Sovereign obligations	1,159		—		—		—		—		—		(1,159)		—		—
Commercial mortgage-backed securities	315		—		—		70		—		—		—		385		—
Loans	11,541		10		(1,911)		1,089		—		—		7,554		18,283		119
Net derivatives (2)	47,770		(9,100)		(1,559)		—		(8,262)		—		46,148		74,997		9,903
Other secured financings	32,377		—		—		—		(30,015)		—		—		2,362		—
Long-term debt (1)	794,460		(146,261)		—		—		(4,950)		76,443		19,661		739,353		114,362

(1)Realized and unrealized gains/losses are primarily reported in Principal transactions revenues in the Consolidated Statements of Operations. Changes in instrument-specific credit risk related to structured notes within Long-term debt are included in the Consolidated Statements of Comprehensive Income (Loss), net of tax. Changes in unrealized gains/losses included in other comprehensive income (loss) for instruments still held at May 31, 2022 were gains of $31.9 million during the three months ended May 31, 2022.

(2)Net derivatives represent Financial instruments owned, at fair value - Derivatives and Financial instruments sold, not yet purchased, at fair value - Derivatives.

Analysis of Level 3 Assets and Liabilities for the three months ended May 31, 2022

During the three months ended May 31, 2022, transfers of assets of $51.3 million from Level 2 to Level 3 of the fair value hierarchy are primarily attributed to:

•CDOs and CLOs of $20.0 million, other asset-backed securities of $15.8 million and loans and other receivables of $15.1 million due to reduced pricing transparency.

During the three months ended May 31, 2022, transfers of assets of $11.7 million from Level 3 to Level 2 are primarily attributed to:

•Corporate debt securities of $3.6 million, loans and other receivables of $3.4 million and corporate equity securities of $3.1 million due to greater pricing transparency supporting classification into Level 2.

During the three months ended May 31, 2022, transfers of liabilities of $98.2 million from Level 2 to Level 3 of the fair value hierarchy are primarily attributed to:

•Net derivatives of $66.2 million, structured notes within long-term debt of $23.0 million and loans of $9.1 million due to reduced pricing and market transparency.

During the three months ended May 31, 2022, transfers of liabilities of $28.0 million from Level 3 to Level 2 of the fair value hierarchy are primarily attributed to:

•Net derivatives of $20.0 million and structured notes within long-term debt of $3.3 million due to greater market and pricing transparency.

Net gains on Level 3 assets were $30.4 million and net gains on Level 3 liabilities were $159.2 million for the three months ended May 31, 2022. Net gains on Level 3 assets were primarily due to increased market values across corporate equity securities and corporate debt securities, partially offset by decreases in loans to and investments in associated companies and loans and other receivables. Net gains on Level 3 liabilities were primarily due to decreased valuations of structured notes within long-term debt.


	Balance, February 28, 2021		Total gains/ losses (realized and unrealized) (1)		Purchases		Sales		Settlements		Issuances		Net transfers into (out of) Level 3		Balance, May 31, 2021		Changes in unrealized gains/losses included in earnings relating to instruments still held at May 31, 2021 (1)
Assets:
Financial instruments owned, at fair value:
Corporate equity securities	$	102,065	$	7,997	$	448	$	(24,561)	$	—	$	—	$	502	$	86,451	$	(4,971)
Corporate debt securities	6,811		1,292		4,116		(5,870)		(132)		—		1,768		7,985		963
CDOs and CLOs	33,199		7,478		4,287		(37,324)		(1,203)		—		20,124		26,561		2,888
Residential mortgage-backed securities	21,692		205		—		—		(612)		—		(15,252)		6,033		(36)
Commercial mortgage-backed securities	2,671		201		—		—		(1,696)		—		—		1,176		(824)
Other asset-backed securities	60,594		3,575		12,835		(1,099)		(14,408)		—		9,058		70,555		819
Loans and other receivables	149,084		2,814		26,948		(8,070)		(156)		—		19,792		190,412		706
Investments at fair value	219,541		26,775		6,634		(17,085)		(5,031)		—		—		230,834		11,318
FXCM term loan	62,132		(2,977)		—		—		—		—		—		59,155		(2,977)
Loans to and investments in associated companies	39,397		(2,110)		—		—		—		—		—		37,287		(2,110)

Liabilities:
Financial instruments sold, not yet purchased, at fair value:
Corporate equity securities	$	4,443	$	42	$	(23)	$	—	$	—	$	—	$	—	$	4,462	$	(40)
Corporate debt securities	1,571		(22)		(665)		27		—		—		16		927		(38)
Commercial mortgage-backed securities	35		—		(35)		35		—		—		—		35		—
Loans	14,916		(7)		(637)		6,330		44		—		(257)		20,389		(167)
Net derivatives (2)	305,506		(8,965)		(36)		33,715		593		—		(103,755)		227,058		8,372
Other secured financings	2,168		—		—		—		—		325		—		2,493		—
Long-term debt (1)	723,115		15,986		—		—		—		28,565		27,432		795,098		3,057

(1)Realized and unrealized gains/losses are primarily reported in Principal transactions revenues in the Consolidated Statements of Operations. Changes in instrument specific credit risk related to structured notes within long-term debt are included in the Consolidated Statements of Comprehensive Income (Loss), net of tax. Changes in unrealized gains/losses included in other comprehensive income (loss) for instruments still held at May 31, 2021 were losses of $19.0 million during the three months ended May 31, 2021.

(2)Net derivatives represent Financial instruments owned, at fair value - Derivatives and Financial instruments sold, not yet purchased, at fair value - Derivatives.

Analysis of Level 3 Assets and Liabilities for the three months ended May 31, 2021

During the three months ended May 31, 2021, transfers of assets of $57.8 million from Level 2 to Level 3 of the fair value hierarchy are primarily attributed to:

•Loans and other receivables of $20.9 million, CDOs and CLOs of $20.1 million and other asset-backed securities of $13.5 million due to reduced pricing transparency.

During the three months ended May 31, 2021, transfers of assets of $21.8 million from Level 3 to Level 2 are primarily attributed to:

•Residential mortgage-backed securities of $15.3 million and other asset-backed securities of $4.4 million due to greater pricing transparency supporting classification into Level 2.

During the three months ended May 31, 2021, transfers of liabilities of $78.1 million from Level 2 to Level 3 of the fair value hierarchy are primarily attributed to:

•Net derivatives of $50.5 million and structured notes within long-term debt of $27.4 million due to reduced pricing and market transparency.

During the three months ended May 31, 2021, transfers of liabilities of $154.7 million from Level 3 to Level 2 of the fair value hierarchy are primarily attributed to:

•Net derivatives of $154.2 million due to greater pricing transparency.

Net gains on Level 3 assets were $45.3 million and net losses on Level 3 liabilities were $7.0 million for the three months ended May 31, 2021. Net gains on Level 3 assets were primarily due to increased market values across investments at fair value, corporate equity securities, CDOs and CLOs and other asset-backed securities. Net losses on Level 3 liabilities were primarily due to increased valuations of structured notes within long-term debt, partially offset by decreases in certain derivatives.

The following is a summary of changes in fair value of our financial assets and liabilities that have been categorized within Level 3 of the fair value hierarchy for the six months ended May 31, 2022 (in thousands):


	Balance, November 30, 2021		Total gains/ losses (realized and unrealized) (1)		Purchases		Sales		Settlements		Issuances		Net transfers into (out of) Level 3		Balance, May 31, 2022		Changes in unrealized gains/losses included in earnings relating to instruments still held at May 31, 2022 (1)
Assets:
Financial instruments owned, at fair value:
Corporate equity securities	$	87,647	$	36,463	$	69,837	$	(13,839)	$	—	$	—	$	20,853	$	200,961	$	36,204
Corporate debt securities	11,803		5,631		9,465		(18,345)		(9)		—		12,268		20,813		2,381
CDOs and CLOs	31,946		254		31,245		(37,305)		(5,033)		—		28,751		49,858		(1,304)
Residential mortgage-backed securities	1,477		(111)		—		(204)		(103)		—		—		1,059		(57)
Commercial mortgage-backed securities	2,333		(463)		—		—		—		—		—		1,870		(29)
Other asset-backed securities	93,524		835		37,795		(17,238)		(22,812)		—		(7,326)		84,778		1,324
Loans and other receivables	135,239		(9,814)		29,962		(25,983)		(229)		—		8,577		137,752		(9,726)
Investments at fair value	154,373		33,310		14,286		—		(14,718)		—		(23,407)		163,844		33,380
FXCM term loan	50,455		1,425		—		—		—		—		—		51,880		1,425
Loans to and investments in associated companies	30,842		(16,047)		—		—		—		—		—		14,795		—

Liabilities:
Financial instruments sold, not yet purchased, at fair value:
Corporate equity securities	$	4,635	$	(3,592)	$	(2,344)	$	5,050	$	—	$	—	$	—	$	3,749	$	3,009
Corporate debt securities	482		(11)		(70)		—		—		—		—		401		5
Commercial mortgage-backed securities	210		—		—		175		—		—		—		385		—
Loans	15,770		(15)		(12,315)		10,194		(87)		—		4,736		18,283		104
Net derivatives (2)	67,769		(88,018)		(1,559)		—		—		21,024		75,781		74,997		86,050
Other secured financings	25,905		—		—		—		(23,543)		—		—		2,362		—
Long-term debt (1)	881,732		(240,698)		—		—		—		100,195		(1,876)		739,353		175,615

(1)Realized and unrealized gains/losses are primarily reported in Principal transactions revenues in the Consolidated Statements of Operations. Changes in instrument-specific credit risk related to structured notes within Long-term debt are included in the Consolidated Statements of Comprehensive Income (Loss), net of tax. Changes in unrealized gains/losses included in other comprehensive income (loss) for instruments still held at May 31, 2022 were gains of $65.1 million during the six months ended May 31, 2022.

(2)Net derivatives represent Financial instruments owned, at fair value - Derivatives and Financial instruments sold, not yet purchased, at fair value - Derivatives.

Analysis of Level 3 Assets and Liabilities for the six months ended May 31, 2022

During the six months ended May 31, 2022, transfers of assets of $64.7 million from Level 2 to Level 3 of the fair value hierarchy are primarily attributed to:

•CDOs and CLOs of $28.8 million, other asset-backed securities of $14.0 million, loans and other receivables of $9.7 million, corporate debt securities of $6.7 million and corporate equity securities of $5.6 million due to reduced pricing transparency.

During the six months ended May 31, 2022, transfers of assets of $25.0 million from Level 3 to Level 2 are primarily attributed to:

•Other asset-backed securities of $21.4 million due to greater pricing transparency supporting classification into Level 2.

During the six months ended May 31, 2022, transfers of liabilities of $122.6 million from Level 2 to Level 3 of the fair value hierarchy are primarily attributed to:

•Net derivatives of $80.8 million, structured notes within long-term debt of $37.0 million and loans of $4.8 million due to reduced pricing and market transparency.

During the six months ended May 31, 2022, transfers of liabilities of $44.0 million from Level 3 to Level 2 of the fair value hierarchy are primarily attributed to:

•Structured notes within long-term debt of $38.9 million and net derivatives of $5.0 million due to greater market and pricing transparency.

Net gains on Level 3 assets were $51.5 million and net gains on Level 3 liabilities were $332.3 million for the six months ended May 31, 2022. Net gains on Level 3 assets were primarily due to increased market values across corporate equity securities and investments at fair value, partially offset by decreases in loans to and investments in associated companies and loans and other receivables. Net gains on Level 3 liabilities were primarily due to decreased valuations of structured notes within long-term debt and certain derivatives.


	Balance, November 30, 2020		Total gains/ losses (realized and unrealized) (1)		Purchases		Sales		Settlements		Issuances		Net transfers into (out of) Level 3		Balance, May 31, 2021		Changes in unrealized gains/ losses included in earnings relating to instruments still held at May 31, 2021 (1)
Assets:
Financial instruments owned, at fair value:
Corporate equity securities	$	75,904	$	11,299	$	8,288	$	(37,297)	$	—	$	—	$	28,257	$	86,451	$	(3,683)
Corporate debt securities	23,146		2,466		4,370		(5,960)		(132)		—		(15,905)		7,985		1,492
CDOs and CLOs	17,972		10,616		16,510		(35,251)		(1,427)		—		18,141		26,561		6,808
Residential mortgage-backed securities	21,826		33		799		(784)		(1,126)		—		(14,715)		6,033		88
Commercial mortgage-backed securities	2,003		158		1,119		(393)		(1,696)		—		(15)		1,176		(740)
Other asset-backed securities	79,995		6,373		34,476		(27,647)		(26,465)		—		3,823		70,555		1,158
Loans and other receivables	134,636		17,580		37,431		(50,556)		(273)		—		51,594		190,412		14,146
Investments at fair value	213,946		103,032		11,489		(47,244)		(8,573)		—		(41,816)		230,834		80,099
FXCM term loan	59,455		(300)		—		—		—		—		—		59,155		(300)
Loans to and investments in associated companies	40,185		(2,898)		—		—		—		—		—		37,287		(2,898)

Liabilities:
Financial instruments sold, not yet purchased, at fair value:
Corporate equity securities	$	4,434	$	64	$	(23)	$	—	$	—	$	—	$	(13)	$	4,462	$	(62)
Corporate debt securities	141		1,349		(563)		—		—		—		—		927		(414)
Commercial mortgage-backed securities	35		—		(35)		35		—		—		—		35		—
Loans	16,635		1,441		(6,872)		8,817		—		—		368		20,389		(884)
Net derivatives (2)	26,017		16,813		(82)		66,304		506		—		117,500		227,058		(17,358)
Other secured financings	1,543		—		—		—		—		950		—		2,493		—
Long-term debt (1)	676,028		41,064		—		—		—		50,295		27,711		795,098		20,565

(1)Realized and unrealized gains/losses are primarily reported in Principal transactions revenues in the Consolidated Statements of Operations. Changes in instrument-specific credit risk related to structured notes within long-term debt are included in the Consolidated Statements of Comprehensive Income (Loss), net of tax. Changes in unrealized gains (losses) included in other comprehensive income (loss) for instruments still held at May 31, 2021 were losses of $61.6 million during the six months ended May 31, 2021.

(2)Net derivatives represent Financial instruments owned, at fair value - Derivatives and Financial instruments sold, not yet purchased, at fair value - Derivatives.

Analysis of Level 3 Assets and Liabilities for the six months ended May 31, 2021

During the six months ended May 31, 2021, transfers of assets of $99.7 million from Level 2 to Level 3 of the fair value hierarchy are primarily attributed to:

•Loans and other receivables of $58.3 million, CDOs and CLOs of $18.2 million, corporate equity securities of $11.0 million and other asset-backed securities of $10.5 million due to reduced pricing transparency.

During the six months ended May 31, 2021, transfers of assets of $70.3 million from Level 3 to Level 2 or Level 1 are primarily attributed to:

•Investments at fair value of $24.2 million, corporate debt securities of $17.5 million, residential mortgage-backed securities of $14.7 million, other asset-backed securities of $6.7 million and loans and other receivables of $6.7 million due to greater pricing transparency supporting classification into Level 2 or Level 1.

During the six months ended May 31, 2021, transfers of liabilities of $162.9 million from Level 2 to Level 3 of the fair value hierarchy are primarily attributed to:

•Net derivatives of $134.8 million and structured notes within long-term debt of $27.7 million due to reduced pricing and market transparency.

During the six months ended May 31, 2021, transfers of liabilities of $17.3 million from Level 3 to Level 2 of the fair value hierarchy are primarily attributed to:

•Net derivatives of $17.3 million due to greater pricing transparency.

Net gains on Level 3 assets were $148.4 million and net losses on Level 3 liabilities were $60.7 million for the six months ended May 31, 2021. Net gains on Level 3 assets were primarily due to increased market values across investments at fair value, corporate equity securities, CDOs and CLOs, other asset-backed securities and loans and other receivables. Net losses on Level 3 liabilities were primarily due to increased valuations of structured notes within long-term debt and certain derivatives.

Quantitative Information about Significant Unobservable Inputs used in Level 3 Fair Value Measurements

The tables below present information on the valuation techniques, significant unobservable inputs and their ranges for our financial assets and liabilities, subject to threshold levels related to the market value of the positions held, measured at fair value on a recurring basis with a significant Level 3 balance. The range of unobservable inputs could differ significantly across different firms given the range of products across different firms in the financial services sector. The inputs are not representative of the inputs that could have been used in the valuation of any one financial instrument (i.e., the input used for valuing one financial instrument within a particular class of financial instruments may not be appropriate for valuing other financial instruments within that given class). Additionally, the ranges of inputs presented below should not be construed to represent uncertainty regarding the fair values of our financial instruments; rather, the range of inputs is reflective of the differences in the underlying characteristics of the financial instruments in each category.

For certain categories, we have provided a weighted average of the inputs allocated based on the fair values of the financial instruments comprising the category. We do not believe that the range or weighted average of the inputs is indicative of the reasonableness of uncertainty of our Level 3 fair values. The range and weighted average are driven by the individual financial instruments within each category and their relative distribution in the population. The disclosed inputs when compared with the inputs as disclosed in other periods should not be expected to necessarily be indicative of changes in our estimates of unobservable inputs for a particular financial instrument as the population of financial instruments comprising the category will vary from period to period based on purchases and sales of financial instruments during the period as well as transfers into and out of Level 3 each period.


May 31, 2022
	Fair Value (in thousands)		Valuation Technique	Significant Unobservable Input(s)	Input/Range				Weighted Average
Financial instruments owned, at fair value
Corporate equity securities	$	200,961
Non-exchange-traded securities			Market approach	Price	$1		to	$366	$80
			Volatility benchmarking	Volatility	50	%	to	70%	60	%

Corporate debt securities	$	20,813	Market approach	Price	$23				—
				EBITDA multiple	3.3				—
			Scenario analysis	Estimated recovery percentage	6%				—

CDOs and CLOs	$	49,858	Discounted cash flows	Constant prepayment rate	20%				—
				Constant default rate	2%				—
				Loss severity	70%				—
				Discount rate/yield	10	%	to	22%	19	%
			Market approach	Price	$69		to	$102	$92

Commercial mortgage- backed securities	$	1,870	Scenario analysis	Estimated recovery percentage	81%				—

Other asset-backed securities	$	66,623	Discounted cash flows	Constant default rate	2%				—
				Loss severity	88%				—
				Discount rate/yield	5	%	to	17%	12	%
				Cumulative loss rate	5	%	to	21%	17	%
				Duration (years)	0.8 years		to	1.6 years	1.3 years
			Market approach	Price	$37				—

Loans and other receivables	$	137,752	Market approach	Price	$7		to	$136	$108
			Scenario analysis	Estimated recovery percentage	5	%	to	94%	35	%

Derivatives	$	18,755
Equity Options			Volatility benchmarking	Volatility	53%				—
Interest rate swaps			Market approach	Basis points upfront	2.8		to	11.1	6.7

Investments at fair value	$	158,312
Private equity securities			Market approach	Price	$1		to	$15,852	$548
				EBITDA multiple	15.7				—
			Discounted cash flows	Discount rate/yield	10	%	to	14%	12	%
			Scenario analysis	Discount rate/yield	12%				—

Investment in FXCM	$	51,880
Term loan			Discounted cash flows	Term based on the pay off (years)	0 months		to	1.7 years	1.7 years

Loans to and investments in associated companies
Non-exchange-traded warrants	$	14,795	Market approach	Underlying stock price	$723				—
				Underlying stock price	€11		to	€14	€13
				Volatility	25	%	to	49%	30	%

Financial instruments sold, not yet purchased, at fair value
Corporate equity securities	$	3,749
Non-exchange-traded securities			Market approach	Price	$1				—

Loans	$	18,283	Market approach	Price	$91				—
			Scenario analysis	Estimated recovery percentage	5%				—

Derivatives	$	97,612
Equity options			Volatility benchmarking	Volatility	29	%	to	63%	49	%
Interest rate swaps			Market approach	Basis points upfront	2.8		to	11.1	6.7
Total return swaps				Price	$99				—

Other secured financings	$	2,362	Scenario analysis	Estimated recovery percentage	13	%	to	36%	29	%

Long-term debt
Structured notes	$	739,353	Market approach	Price	$52		to	$108	$75
				Price	€60		to	€102	€80


November 30, 2021
	Fair Value (in thousands)		Valuation Technique	Significant Unobservable Input(s)	Input/Range				Weighted Average

Financial instruments owned, at fair value
Corporate equity securities	$	86,961
Non-exchange-traded securities			Market approach	Price	$1		to	$366	$183
			Volatility benchmarking	Volatility	40	%	to	53%	45	%

Corporate debt securities	$	11,803	Market approach	Price	$13		to	$100	$86

CDOs and CLOs	$	31,944	Discounted cash flows	Constant prepayment rate	20%				—
				Constant default rate	2%				—
				Loss severity	25	%	to	30%	26	%
				Discount rate/yield	8	%	to	19%	16	%
			Market approach	Price	$86		to	$103	$93

Commercial mortgage- backed securities	$	2,333	Scenario analysis	Estimated recovery percentage	81%				—

Other asset-backed securities	$	86,099	Discounted cash flows	Constant prepayment rate	0	%	to	35%	31	%
				Constant default rate	2	%	to	4%	4	%
				Loss severity	60	%	to	85%	55	%
				Discount rate/yield	3	%	to	16%	10	%
				Cumulative loss rate	7	%	to	20%	14	%
				Duration (years)	0.7 years		to	1.4 years	1.1 years
			Market approach	Price	$37		to	$100	$94

Loans and other receivables	$	134,015	Market approach	Price	$31		to	$101	$54
			Scenario analysis	Estimated recovery percentage	9	%	to	100%	76	%

Derivatives	$	6,501
Equity options			Volatility benchmarking	Volatility	46%				—
Interest rate swaps			Market approach	Basis points upfront	0.1		to	8.7	3.3
Total return swaps				Price	$100				—

Investments at fair value	$	128,152
Private equity securities			Market approach	Price	$1		to	$152	$32
				EBITDA multiple	16.9				—
				Revenue multiple	4.9		to	5.1	5.0
			Scenario analysis	Estimated recovery percentage	7%				—
				Discount rate/yield	13	%	to	21%	17	%
				Revenue growth	0%				—

Investment in FXCM	$	50,455
Term loan			Discounted cash flows	Term based on the pay off (years)	0 months		to	2.2 years	2.2 years

Loans to and investments in associated companies
Non-exchange-traded warrants	$	30,842	Market approach	Underlying stock price	$662				—
				Underlying stock price	€15		to	€18	€16
				Volatility	25	%	to	59%	31	%

Financial instruments sold, not yet purchased, at fair value
Corporate equity securities	$	4,635
Non-exchange-traded securities			Market approach	Price	$1				—

Loans	$	15,770	Market approach	Price	$31		to	$100	$43
			Scenario analysis	Estimated recovery percentage	50%				—

Derivatives	$	76,533
Equity options			Volatility benchmarking	Volatility	26	%	to	77%	40	%
Interest rate swaps			Market approach	Basis points upfront	0.1		to	8.7	3.1
Total return swaps				Price	$100				—

Other secured financings	$	25,905	Scenario analysis	Estimated recovery percentage	13	%	to	98%	92	%

Long-term debt
Structured notes	$	881,732	Market approach	Price	$76		to	$115	$94
				Price	€81		to	€113	€103

The fair values of certain Level 3 assets and liabilities that were determined based on third-party pricing information, unadjusted past transaction prices or a percentage of the reported enterprise fair value are excluded from the above tables. At May 31, 2022 and November 30, 2021, asset exclusions consisted of $32.9 million and $40.8 million, respectively, primarily comprised of certain investments at fair value, other asset-backed securities, certain derivatives, corporate equity securities, loans and other receivables and residential mortgage-backed securities. At May 31, 2022 and November 30, 2021, liability exclusions consisted of $5.1 million and $2.2 million, respectively, primarily comprised of certain derivatives, corporate debt securities and commercial mortgage-backed securities.

Uncertainty of Fair Value Measurement from Use of Significant Unobservable Inputs

For recurring fair value measurements categorized within Level 3 of the fair value hierarchy, the uncertainty of the fair value measurement due to the use of significant unobservable inputs and interrelationships between those unobservable inputs (if any) are described below:

• Non-exchange-traded securities, corporate debt securities, CDOs and CLOs, loans and other receivables, other asset-backed securities, private equity securities, non-exchange-traded warrants, certain derivatives and structured notes using a market approach valuation technique. A significant increase (decrease) in the price of the private equity securities, non-exchange-traded securities, corporate debt securities, CDOs and CLOs, other asset-backed securities, loans and other receivables, total return swaps, and structured notes would result in a significantly higher (lower) fair value measurement. A significant increase (decrease) in the EBITDA multiple related to corporate debt securities or private equity securities would result in a significantly higher (lower) fair value measurement. A significant increase (decrease) in the revenue multiple related to private equity securities would result in a significantly higher (lower) fair value measurement. A significant increase (decrease) in the underlying stock price of non-exchange-traded warrants would result in a significantly higher (lower) fair value measurement. A significant increase (decrease) in the volatility of the underlying stock price of non-exchange-traded warrants would result in a significantly higher (lower) fair value measurement. Depending on whether we are a receiver or (payer) of basis points upfront, a significant increase in basis points would result in a significant increase (decrease) in the fair value measurement of interest rate swaps.

•Corporate debt securities, loans and other receivables, commercial mortgage-backed securities, private equity securities and other secured financings using scenario analysis. A significant increase (decrease) in the possible recovery rates of the cash flow outcomes underlying the financial instrument would result in a significantly higher (lower) fair value measurement for the financial instrument. A significant increase (decrease) in the discount rate/yield underlying the investment would result in a significantly lower (higher) fair value measurement. A significant increase (decrease) in the revenue growth underlying the investment would result in a significantly higher (lower) fair value measurement.

•CDOs and CLOs, other asset-backed securities, private equity securities and the FXCM term loan using a discounted cash flow valuation technique. A significant increase (decrease) in isolation in the constant default rate, loss severity or cumulative loss rate would result in a significantly lower (higher) fair value measurement. The impact of changes in the constant prepayment rate and duration would have differing impacts depending on the capital structure and type of security. A significant increase (decrease) in the discount rate/security yield would result in a significantly lower (higher) fair value measurement. A significant increase (decrease) in term based on the time to pay off the loan would result in a lower (higher) fair value measurement.

•Derivative equity options and non-exchange-traded securities using volatility benchmarking. A significant increase (decrease) in volatility would result in a significantly higher (lower) fair value measurement.

Fair Value Option Election

We have elected the fair value option for all loans and loan commitments made by our investment banking and capital markets businesses. These loans and loan commitments include loans entered into by our investment banking division in connection with client bridge financing and loan syndications, loans purchased by our leveraged credit trading desk as part of its bank loan trading activities and mortgage and consumer loan commitments, purchases and fundings in connection with mortgage-backed and other asset-backed securitization activities. Loans and loan commitments originated or purchased by our leveraged credit and mortgage-backed businesses are managed on a fair value basis. Loans are included in Financial instruments owned, at fair value and loan commitments are included in Financial instruments owned, at fair value and Financial instruments sold, not yet purchased, at fair value in the Consolidated Statements of Financial Condition. The fair value option election is not applied to loans made to affiliate entities as such loans are entered into as part of ongoing, strategic business ventures. Loans to affiliate entities are included in Loans to and investments in associated companies in the Consolidated Statements of Financial Condition and are accounted for on an amortized cost basis. We have also elected the fair value option for certain of our structured notes, which are managed by our investment banking and capital markets businesses and are included in Long-term debt in the Consolidated Statements of Financial Condition. We have elected the fair value option for certain financial instruments held by subsidiaries as the investments are risk managed on a fair value basis. The fair value option has been

elected for certain other secured financings that arise in connection with our securitization activities and other structured financings. Other secured financings, receivables from brokers, dealers and clearing organizations, receivables from customers of securities operations, other receivables, payables to brokers, dealers and clearing organizations and payables to customers of securities operations, are accounted for at cost plus accrued interest rather than at fair value; however, the recorded amounts approximate fair value due to their liquid or short-term nature, except for our automobile loans.

The following is a summary of gains (losses) due to changes in instrument-specific credit risk on loans, other receivables and debt instruments and gains (losses) due to other changes in fair value on long-term debt measured at fair value under the fair value option (in thousands):


	For the Three Months Ended May 31,				For the Six Months Ended May 31,
	2022		2021		2022		2021
Financial instruments owned, at fair value:
Loans and other receivables	$	(1,478)	$	15,520	$	(1,294)	$	23,259

Financial instruments sold, not yet purchased, at fair value:
Loans	$	(882)	$	(363)	$	(4,889)	$	(363)

Long-term debt:
Changes in instrument-specific credit risk (1)	$	42,886	$	(32,247)	$	94,133	$	(122,898)
Other changes in fair value (2)	161,381		6,846		255,932		86,113

(1) Changes in instrument-specific credit risk related to structured notes are included in the Consolidated Statements of Comprehensive Income (Loss), net of taxes.

(2) Other changes in fair value are included in Principal transactions revenues in the Consolidated Statements of Operations.

The following is a summary of the amounts by which contractual principal is greater than (less than) fair value for loans and other receivables, long-term debt and other secured financings measured at fair value under the fair value option (in thousands):


	May 31, 2022		November 30, 2021
Financial instruments owned, at fair value:
Loans and other receivables (1)	$	5,703,268	$	5,600,648
Loans and other receivables on nonaccrual status and/or 90 days or greater past due (1) (2)	143,521		64,203
Long-term debt	$	317,452	$	(38,391)
Other secured financings	$	2,913	$	3,432

(1) Interest income is recognized separately from other changes in fair value and is included in Interest income in the Consolidated Statements of Operations.

(2) Amounts include loans and other receivables 90 days or greater past due by which contractual principal exceeds fair value of $109.7 million and $19.7 million at May 31, 2022 and November 30, 2021, respectively.

The aggregate fair value of loans and other receivables on nonaccrual status and/or 90 days or greater past due was $164.4 million and $56.9 million at May 31, 2022 and November 30, 2021, respectively, which includes loans and other receivables 90 days or greater past due of $33.3 million and $23.5 million at May 31, 2022 and November 30, 2021, respectively.

At May 31, 2022, Jefferies Group owned shares which represent a 38% economic interest in ApiJect Systems, Corp. ("ApiJect"). The investment in ApiJect is accounted for at fair value by electing the fair value option available under GAAP and is included within corporate equity securities in Financial instruments owned, at fair value, in the Consolidated Statement of Financial Condition. During the three months ended May 31, 2022, in connection with ApiJect's issuance of additional equity to third party investors, Jefferies Group purchased additional common shares of ApiJect and obtained a right to 1.125% of ApiJect's future revenues for cash consideration of $25.0 million. In addition, Jefferies Group converted its $25.0 million term loan agreement into additional common shares. At May 31, 2022, the total fair value of Jefferies Group's equity investment in common shares of ApiJect is $100.1 million, which is calibrated based on this last funding round during the three months ended

May 31, 2022 and included within Level 3 of the fair value hierarchy. Additionally, Jefferies Group received warrants to purchase up to 950,000 shares of common stock at any time or from time to time on or before April 15, 2032. For both the three and six months ended May 31, 2022, the change in fair value of Jefferies Group's equity investments in ApiJect was a mark-to-market gain of $37.3 million.

Jefferies Group also has a term loan agreement with a principal of ApiJect of $25.0 million maturing on July 30, 2022. The loan is accounted for at cost plus accrued interest and is reported within Other assets in the Consolidated Statement of Financial Condition. Interest income of $0.6 million and $0.4 million for the three months ended May 31, 2022 and 2021, respectively, and $1.1 million and $0.6 million for the six months ended May 31, 2022 and 2021, respectively, was recognized related to the loan and is included in Interest income in the Consolidated Statements of Operations. The loan has a fair value of $27.7 million at May 31, 2022, which would be classified as Level 3 in the fair value hierarchy.

Financial Instruments Not Measured at Fair Value

Certain of our financial instruments are not carried at fair value but are recorded at amounts that approximate fair value due to their liquid or short-term nature and generally negligible credit risk. These financial assets include Cash and cash equivalents and Cash and securities segregated and on deposit for regulatory purposes or deposited with clearing and depository organizations and would generally be presented within Level 1 of the fair value hierarchy.