MORGAN STANLEY

For the period ended Mar 31, 2024. Filed May 3, 2024.

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A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.

Mar 31, 2024 · Filed May 3, 2024

MS$187.10+3.1%Stored close · as of Nov 9, 2026

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Contents

6. Derivative Instruments and Hedging Activities

Derivative Instruments and Hedging Activities

Fair Values of Derivative Contracts

	Assets at March 31, 2024
$ in millions	Bilateral OTC	Cleared OTC	Exchange-Traded	Total
Designated as accounting hedges
Interest rate	$4	$—	$—	$4
Foreign exchange	83	20	—	103
Total	87	20	—	107
Not designated as accounting hedges
Economic hedges of loans
Credit	3	30	—	33
Other derivatives
Interest rate	120,182	16,370	311	136,863
Credit	5,522	4,896	—	10,418
Foreign exchange	70,243	1,968	38	72,249
Equity	24,722	—	51,738	76,460
Commodity and other	14,511	—	2,254	16,765
Total	235,183	23,264	54,341	312,788
Total gross derivatives	$235,270	$23,284	$54,341	$312,895
Amounts offset
Counterparty netting	(163,903)	(20,569)	(51,634)	(236,106)
Cash collateral netting	(37,516)	(1,841)	—	(39,357)
Total in Trading assets	$33,851	$874	$2,707	$37,432
Financial instruments collateral	(17,375)	—	—	(17,375)
Net amounts	$16,476	$874	$2,707	$20,057
Net amounts for which master netting or collateral agreements are not in place or may not be legally enforceable	$2,798

	Liabilities at March 31, 2024
$ in millions	Bilateral OTC	Cleared OTC	Exchange-Traded	Total
Designated as accounting hedges
Interest rate	$482	$—	$—	$482
Foreign exchange	16	12	—	28
Total	498	12	—	510
Not designated as accounting hedges
Economic hedges of loans
Credit	44	779	—	823
Other derivatives
Interest rate	112,206	14,460	297	126,963
Credit	5,550	4,524	—	10,074
Foreign exchange	64,588	2,149	157	66,894
Equity	38,982	—	51,847	90,829
Commodity and other	11,770	—	2,639	14,409
Total	233,140	21,912	54,940	309,992
Total gross derivatives	$233,638	$21,924	$54,940	$310,502
Amounts offset
Counterparty netting	(163,903)	(20,569)	(51,634)	(236,106)
Cash collateral netting	(41,077)	(1,309)	—	(42,386)
Total in Trading liabilities	$28,658	$46	$3,306	$32,010
Financial instruments collateral	(4,092)	—	(341)	(4,433)
Net amounts	$24,566	$46	$2,965	$27,577
Net amounts for which master netting or collateral agreements are not in place or may not be legally enforceable	4,950

48	March 2024 Form 10-Q

Table of Contents

Notes to Consolidated Financial Statements(Unaudited)

	Assets at December 31, 2023
$ in millions	Bilateral OTC	Cleared OTC	Exchange-Traded	Total
Designated as accounting hedges
Interest rate	$25	$—	$—	$25
Foreign exchange	5	5	—	10
Total	30	5	—	35
Not designated as accounting hedges
Economic hedges of loans
Credit	2	27	—	29
Other derivatives
Interest rate	127,414	19,914	854	148,182
Credit	5,712	4,896	—	10,608
Foreign exchange	90,654	2,570	16	93,240
Equity	20,338	—	37,737	58,075
Commodity and other	13,928	—	2,353	16,281
Total	258,048	27,407	40,960	326,415
Total gross derivatives	$258,078	$27,412	$40,960	$326,450
Amounts offset
Counterparty netting	(184,553)	(23,851)	(38,510)	(246,914)
Cash collateral netting	(39,493)	(2,730)	—	(42,223)
Total in Trading assets	$34,032	$831	$2,450	$37,313
Financial instruments collateral	(15,690)	—	—	(15,690)
Net amounts	$18,342	$831	$2,450	$21,623
Net amounts for which master netting or collateral agreements are not in place or may not be legally enforceable	$2,641

	Liabilities at December 31, 2023
$ in millions	Bilateral OTC	Cleared OTC	Exchange-Traded	Total
Designated as accounting hedges
Interest rate	$467	$—	$—	$467
Foreign exchange	414	43	—	457
Total	881	43	—	924
Not designated as accounting hedges
Economic hedges of loans
Credit	43	702	—	745
Other derivatives
Interest rate	120,604	17,179	590	138,373
Credit	5,920	4,427	—	10,347
Foreign exchange	87,104	2,694	106	89,904
Equity	31,545	—	37,349	68,894
Commodity and other	12,237	—	2,830	15,067
Total	257,453	25,002	40,875	323,330
Total gross derivatives	$258,334	$25,045	$40,875	$324,254
Amounts offset
Counterparty netting	(184,553)	(23,851)	(38,510)	(246,914)
Cash collateral netting	(41,082)	(983)	—	(42,065)
Total in Trading liabilities	$32,699	$211	$2,365	$35,275
Financial instruments collateral	(6,864)	(8)	(37)	(6,909)
Net amounts	$25,835	$203	$2,328	$28,366
Net amounts for which master netting or collateral agreements are not in place or may not be legally enforceable	$5,911

Amounts relate to master netting agreements and collateral agreements that have been determined by the Firm to be legally enforceable in the event of default but where certain other netting criteria are not met in accordance with applicable offsetting accounting guidance.

See Note 4 for information related to the unsettled fair value of futures contracts not designated as accounting hedges, which are excluded from the previous tables.

Notionals of Derivative Contracts

	Assets at March 31, 2024
$ in billions	Bilateral OTC	Cleared OTC	Exchange- Traded	Total
Designated as accounting hedges
Interest rate	$—	$88	$—	$88
Foreign exchange	14	2	—	16
Total	14	90	—	104
Not designated as accounting hedges
Economic hedges of loans
Credit	—	—	—	—
Other derivatives
Interest rate	4,324	7,845	570	12,739
Credit	203	161	—	364
Foreign exchange	3,692	193	14	3,899
Equity	583	—	509	1,092
Commodity and other	137	—	70	207
Total	8,939	8,199	1,163	18,301
Total gross derivatives	$8,953	$8,289	$1,163	$18,405

	Liabilities at March 31, 2024
$ in billions	Bilateral OTC	Cleared OTC	Exchange- Traded	Total
Designated as accounting hedges
Interest rate	$2	$195	$—	$197
Foreign exchange	1	2	—	3
Total	3	197	—	200
Not designated as accounting hedges
Economic hedges of loans
Credit	2	21	—	23
Other derivatives
Interest rate	4,639	7,457	427	12,523
Credit	217	143	—	360
Foreign exchange	3,742	196	43	3,981
Equity	666	—	788	1,454
Commodity and other	103	—	83	186
Total	9,369	7,817	1,341	18,527
Total gross derivatives	$9,372	$8,014	$1,341	$18,727

	Assets at December 31, 2023
$ in billions	Bilateral OTC	Cleared OTC	Exchange-Traded	Total
Designated as accounting hedges
Interest rate	$—	$92	$—	$92
Foreign exchange	1	1	—	2
Total	1	93	—	94
Not designated as accounting hedges
Economic hedges of loans
Credit	—	1	—	1
Other derivatives
Interest rate	4,153	8,357	560	13,070
Credit	214	176	—	390
Foreign exchange	3,378	165	7	3,550
Equity	528	—	440	968
Commodity and other	142	—	65	207
Total	8,415	8,699	1,072	18,186
Total gross derivatives	$8,416	$8,792	$1,072	$18,280

49	March 2024 Form 10-Q

Table of Contents

Notes to Consolidated Financial Statements(Unaudited)

	Liabilities at December 31, 2023
$ in billions	Bilateral OTC	Cleared OTC	Exchange-Traded	Total
Designated as accounting hedges
Interest rate	$3	$183	$—	$186
Foreign exchange	14	3	—	17
Total	17	186	—	203
Not designated as accounting hedges
Economic hedges of loans
Credit	2	22	—	24
Other derivatives
Interest rate	4,631	8,197	455	13,283
Credit	229	155	—	384
Foreign exchange	3,496	167	33	3,696
Equity	587	—	712	1,299
Commodity and other	101	—	79	180
Total	9,046	8,541	1,279	18,866
Total gross derivatives	$9,063	$8,727	$1,279	$19,069

The notional amounts of derivative contracts generally overstate the Firm’s exposure. In most circumstances, notional amounts are used only as a reference point from which to calculate amounts owed between the parties to the contract. Furthermore, notional amounts do not reflect the benefit of legally enforceable netting arrangements or risk mitigating transactions.

For a discussion of the Firm’s derivative instruments and hedging activities, see Note 6 to the financial statements in the 2023 Form 10-K.

Gains (Losses) on Accounting Hedges

	Three Months Ended
	March 31,
$ in millions	2024	2023
Fair value hedges—Recognized in Interest income
Interest rate contracts	$572	$(372)
Investment Securities—AFS	(552)	381
Fair value hedges—Recognized in Interest expense
Interest rate contracts	$(2,127)	$2,284
Deposits	10	(54)
Borrowings	2,109	(2,240)
Net investment hedges—Foreign exchange contracts
Recognized in OCI	$371	$(89)
Forward points excluded from hedge effectiveness testing—Recognized in Interest income	48	43
Cash flow hedges—Interest rate contracts1
Recognized in OCI	$(47)	$7
Less: Realized gains (losses) (pre-tax) reclassified from AOCI to interest income	(11)	(1)
Net change in cash flow hedges included within AOCI	(36)	8

For the current quarter ended March 31, 2024, there were no forecasted transactions that failed to occur. The net gains (losses) associated with cash flow hedges expected to be reclassified from AOCI within 12 months as of March 31, 2024, is approximately $(46) million. The maximum length of time over which forecasted cash flows are hedged is 15 months.

Fair Value Hedges—Hedged Items

$ in millions	AtMarch 31,2024	AtDecember 31,2023
Investment Securities—AFS
Amortized cost basis currently or previously hedged	$46,737	$47,179
Basis adjustments included in amortized cost1	$(1,120)	$(732)
Deposits
Carrying amount currently or previously hedged	$12,216	$10,569
Basis adjustments included in carrying amount1	$(41)	$(31)
Borrowings
Carrying amount currently or previously hedged	$163,127	$158,659
Basis adjustments included in carrying amount—Outstanding hedges	$(11,305)	$(9,219)
Basis adjustments included in carrying amount—Terminated hedges	$(666)	$(671)

Hedge accounting basis adjustments are primarily related to outstanding hedges.

Gains (Losses) on Economic Hedges of Loans

	Three Months Ended
	March 31,
$ in millions	2024	2023
Recognized in Other revenues
Credit contracts1	$(123)	$(161)

Amounts related to hedges of certain held-for-investment and held-for-sale loans.

Net Derivative Liabilities and Collateral Posted

$ in millions	AtMarch 31,2024	AtDecember 31,2023
Net derivative liabilities with credit risk-related contingent features	$18,862	$21,957
Collateral posted	12,746	16,389

The previous table presents the aggregate fair value of certain derivative contracts that contain credit risk-related contingent features that are in a net liability position for which the Firm has posted collateral in the normal course of business.

Incremental Collateral and Termination Payments upon Potential Future Ratings Downgrade

$ in millions	AtMarch 31,2024
One-notch downgrade	$359
Two-notch downgrade	411
Bilateral downgrade agreements included in the amounts above1	$624

Amount represents arrangements between the Firm and other parties where upon the downgrade of one party, the downgraded party must deliver collateral to the other party. These bilateral downgrade arrangements are used by the Firm to manage the risk of counterparty downgrades.

The additional collateral or termination payments that may be called in the event of a future credit rating downgrade vary by contract and can be based on ratings by Moody’s Investors Service, Inc., S&P Global Ratings and/or other rating agencies. The previous table shows the future potential collateral amounts and termination payments that could be called or required by counterparties or exchange and clearing organizations in the event of one-notch or two-notch

March 2024 Form 10-Q	50

Table of Contents

Notes to Consolidated Financial Statements(Unaudited)

downgrade scenarios based on the relevant contractual downgrade triggers.

Maximum Potential Payout/Notional of Credit Protection Sold 1

	Years to Maturity at March 31, 2024
$ in billions	< 1	1-3	3-5	Over 5	Total
Single-name CDS
Investment grade	$19		$29		$40	$14	$102
Non-investment grade	7		14		17	4	42
Total	$26		$43		$57	$18	$144
Index and basket CDS
Investment grade	$8		$19		$46	$7	$80
Non-investment grade	9		14		77	34	134
Total	$17		$33		$123	$41	$214
Total CDS sold	$43		$76		$180	$59	$358
Other credit contracts	—		—		—	3	3
Total credit protection sold	$43		$76		$180	$62	$361
CDS protection sold with identical protection purchased	$306

	Years to Maturity at December 31, 2023
$ in billions	< 1	1-3	3-5	Over 5	Total
Single-name CDS
Investment grade	$19		$29		$39	$10	$97
Non-investment grade	7		14		17	1	39
Total	$26		$43		$56	$11	$136
Index and basket CDS
Investment grade	$8		$19		$85	$4	$116
Non-investment grade	8		14		95	17	134
Total	$16		$33		$180	$21	$250
Total CDS sold	$42		$76		$236	$32	$386
Other credit contracts	—		—		—	3	3
Total credit protection sold	$42		$76		$236	$35	$389
CDS protection sold with identical protection purchased	$330

Fair Value Asset (Liability) of Credit Protection Sold 1

$ in millions	AtMarch 31,2024	AtDecember 31,2023
Single-name CDS
Investment grade	$2,167	$1,904
Non-investment grade	444	399
Total	$2,611	$2,303
Index and basket CDS
Investment grade	$1,829	$1,929
Non-investment grade	464	45
Total	$2,293	$1,974
Total CDS sold	$4,904	$4,277
Other credit contracts	276	314
Total credit protection sold	$5,180	$4,591

Investment grade/non-investment grade determination is based on the internal credit rating of the reference obligation. Internal credit ratings serve as the CRM’s assessment of credit risk and the basis for a comprehensive credit limits framework used to control credit risk. The Firm uses quantitative models and judgment to estimate the various risk parameters related to each obligor.

Protection Purchased with CDS

	Notional
$ in billions	AtMarch 31,2024	AtDecember 31,2023
Single name	$174	$166
Index and basket	182	213
Tranched index and basket	32	30
Total	$388	$409

	Fair Value Asset (Liability)
$ in millions	AtMarch 31,2024	AtDecember 31,2023
Single name	$(3,114)	$(2,799)
Index and basket	(1,249)	(1,208)
Tranched index and basket	(1,256)	(1,012)
Total	$(5,619)	$(5,019)

The Firm enters into credit derivatives, principally CDS, under which it receives or provides protection against the risk of default on a set of debt obligations issued by a specified reference entity or entities. A majority of the Firm’s counterparties for these derivatives are banks, broker-dealers, and insurance and other financial institutions.

The fair value amounts as shown in the previous tables are prior to cash collateral or counterparty netting. For further information on credit derivatives and other credit contracts, see Note 6 to the financial statements in the 2023 Form 10-K.

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The text of this filing, as the company filed it with the SEC, without its images or exhibits. This is not investment advice.