SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-98668] 

September 29, 2023 

Order Regarding Net Capital Computation for Jefferies Financial Services, Inc.

Jefferies Financial Services, Inc. (“JFSI”) has submitted an amendment to its 

application to the Securities and Exchange Commission (“Commission”) for 

authorization to use the market and credit risk standards of paragraphs (d) through (f) of 

Rule 18a-1 to the Securities Exchange Act of 1934 (“Exchange Act”).1 For market risk, 

paragraphs (d) through (f) require that a firm utilize a VaR model that utilizes a 99 

percent, one-tailed confidence level with price changes equivalent to a ten business-day 

movement in rates and prices. For credit risk, paragraphs (d) through (f) require that a 

firm utilize a maximum potential exposure model equivalent to the VaR of the 

counterparty’s positions with a 99 percent, one-tailed confidence level with price changes 

equivalent to a one-year movement in rates and prices; or based on a review of the 

security-based swap dealer's procedures for managing collateral and if the collateral is 

marked to market daily and the firm has the ability to call for additional collateral daily

the Commission may approve a time horizon of not less than ten business days.2

 

JFSI’s amendment requests approval to use models to compute regulatory capital 

charges as follows:

1

 See 17 CFR 240.18a-1(d); 17 CFR 240.18a-1(e); and 17 CFR 240.18a-1(f). The Commission 

approved JFSI’s application to calculate net capital using the market and credit risk standards of 

paragraphs (d) through (f) for interest rate products on October 29, 2021 (Exchange Act Release 

No. 93479).

2

 See 17 CFR 240.18a-1(e)(2)(iii)(B) and 17 CFR 240.18a-1(d)(9)(ii)(B).
2

(1) Use of models to compute deductions for market and credit risk for interest 

rate cash, option, forward and swap products;3

(2) Use of models to compute deductions for market and credit risk for equity 

cash, option and swap products; 

(3) Use of models to compute deductions for market risk only for equity OTC call 

spreads;

(4) Use of models to compute deductions for market and credit risk for FX spot, 

forward, option and swap products; and, 

(5) Use of models to compute deductions for market risk only for interest rate 

nonlinear products. 

Based on a review of the amendment that JFSI submitted, including an assessment of the 

adequacy of the firm’s internal risk management controls, the mathematical models the 

firm will use for internal risk management and regulatory capital purposes, and the firm’s 

financial position, the Commission has determined that the amendment meets the 

requirements of paragraphs (d) through (f) of Rule 18a-1 for equity, interest rate and FX 

products as described in (1) through (4) above. 

Using the market and credit risk standards of paragraphs (d) through (f) of Rule 

18a-1 for calculating net capital should help JFSI align its supervisory risk management 

practices and regulatory capital requirements more closely, and would adequately capture 

the material risks. As a result, this also should help to ensure the integrity of the risk 

measurement, monitoring and management process. The Commission, therefore, finds 

that approval of the amendment is necessary or appropriate in the public interest or for 

the protection of investors. 

3

 See Exchange Act Release No. 93479 (Order Regarding Net Capital and Initial Margin 

Computations for Jefferies Financial Services, Inc.).
3

Accordingly, IT IS ORDERED, under paragraph (d)(5)(i) of Rule 18a-14 to the 

Exchange Act, that JFSI may calculate net capital using the market and credit risk 

standards of paragraphs (d) through (f) of Rule 18a-1, instead of the provisions of 

paragraphs (c)(1)(iii), (iv), (vi), (vii), and (c)(1)(ix)(A) and (B) of Rule 18a-1 and Rule 

18a-1b, to compute a deduction for: 

(1) Market risk for interest rate cash, option, forward and swap products; equity cash, 

option and swap products; equity OTC call spreads; FX spot, forward, option and 

swap products; and interest rate nonlinear products; and

(2) Credit risk for interest rate cash, option, forward and swap products; equity cash, 

option and swap products; and FX spot, forward, option and swap products.5

 

By the Commission. 

Vanessa A. Countryman, 

Secretary.

4

 See 17 CFR 240.18a-1(d)(5)(i).

5

 See 17 CFR 240.18a-1(c)(1)(iii) and (iv); 17 CFR 240. 18a-1(c)(1)(vi) and (vii); 17 CFR 240.18a1(c)(1)(ix)(A) and (B); and 17 CFR 240.18a-1b.