Important Information Regarding Marks for Swaps and Security-Based Swaps

Dodd-Frank Overview

Product Disclosures & METs

Additional Notifications and Disclosures

Information For All Swaps:

Each mid-market mark (each, a “Mark”) for a swap or security-based swap between you and Jefferies Financial Services Inc. (“Jefferies”) is provided to you subject to the terms and conditions set forth in these notes.

Each Mark is for the date specified for the relevant swap or security-based swap that Jefferies is required to deliver to you pursuant to Section 23.431(d)(2) of the rules promulgated by the CFTC or Section 15Fh-3(c) of the rules promulgated by the SEC (the “Daily Mark”).  All Marks are shown from your point of view.

Each Mark is the midpoint between the bid and offer, or the calculated equivalent thereof as of the close of business of the previous business day without taking into account any amounts for profit, credit reserves, hedging, funding, liquidity and other relevant costs, reserves and adjustments that would be included in an executable price for the swap or security-based swap. The Mark for a swap or security-based swap can change from day to day as a result of changes in the relevant economic markets.  These changes, which can be sudden and material, can make the next Mark for the relevant swap or security-based swap substantially less favorable from your point of view.  

Because a Mark does not include amounts for profit, credit reserves, hedging, funding, liquidity and other relevant costs, reserves and adjustments, it a) may not represent the price at which Jefferies would agree to replace or terminate the relevant swap or security-based swap, b) may not necessarily be the value assigned to the relevant swap or security-based swap for purposes of the books and records of Jefferies, and c) depending on the terms of the trading relationship documentation between the parties, may not represent the value assigned to the relevant swap or security-based swap for the purposes of computing collateral calls and returns. If Jefferies is obligated pursuant to the terms of any contract or otherwise agrees to quote a live price to terminate a swap or security-based swap prior to its stated maturity, that live price may differ from the most recent Mark for the swap or security-based swap. Each Mark is provided solely for the information of the counterparty to the swap or security-based swap and is not intended for the benefit of any other party.  Data used in calculating a Mark may be obtained from third-party sources that Jefferies believes are reliable, but may not have been independently verified.  Jefferies specifically disclaims liability for any use the recipient may make of any Mark including, without limitation, use of such Mark in the preparation of its own financial books and records. Jefferies provides each Mark without charge and without restrictions on the internal use of the Mark by the counterparty

Additional Information For Interest Rate Transactions:

Each Mark represents an estimate of the net present value (NPV) of the expected future cash flows from the relevant swap calculated using a) the proprietary computer valuation models that are used by Jefferies to prepare its own financial books and records for the relevant type of swap, and b) relevant mid-market price data inputs as of the close of business of the previous business day.  Marks do not include a bid-offer spread and other costs, reserves and adjustments that would be included in an actual market price.  In general, the proprietary computer valuation models used by Jefferies are based on appropriate discounting of fixed and floating cash flows as well as the appropriate projection of floating cash flows and reflect assumptions by Jefferies regarding past, present and future market conditions including liquidity of markets, trading volumes and interest rates.  Because of these circumstances, a Mark will not necessarily be indicative of, and may be materially different from, the value which any other person might assign to the relevant swap, including a person that is affiliated with Jefferies.

Additional Information For Foreign Exchange Transactions:

Each Mark is derived from underlying spot prices, applicable futures prices, forward points and implied volatilities obtained from a combination of different independent pricing sources and exchange price files.  These price components are entered into Jefferies’ trading and back-office systems where they are utilized by embedded price interpolation and industry standard option models to calculate each Mark.  Each Mark: a) is generally used by Jefferies to prepare its own financial books and records for the relevant type of swap or forward; and b) is prepared using price data inputs as of the close of business of the previous business day. Marks do not include a bid-offer spread and other costs, reserves and adjustments that would be included in an actual market price. In general, the valuation models used by Jefferies reflect assumptions by Jefferies regarding past, present and future market conditions including liquidity of markets, trading volumes and interest rates. Because of these circumstances, a Mark will not necessarily be indicative of, and may be materially different from, the value which any other person might assign to the relevant proposed swap, including a person that is affiliated with Jefferies.

Additional Information For Equity Derivative Transactions:

The following Mark disclosure solely applies to certain swaps you may enter into with Jefferies that reference an underlier that is an equity security classified by Jefferies as “general collateral” (“GC swaps”).  These swaps are primarily financing transactions, providing exposure to an underlying security.  The price of the underlying equity is the price at which Jefferies is able to enter its hedge and is provided in the transaction supplement and is repriced daily based on the closing price on the relevant stock exchange.  The cost of the financing is variable, based on the underlying security.  In that situation Jefferies believes the base interest rate for the funding leg of the GC swap referenced in the transaction is the best indicator of Mark for that swap for purposes of CFTC rules.

Additional Information For Credit Derivative Transactions:

Each Mark represents an estimate of the net present value (NPV) of the expected future cash flows from the relevant swap or security-based swap calculated using a) the proprietary computer valuation models that are used by Jefferies to prepare its own financial books and records for the relevant type of swap or security-based swap, and b) relevant mid-market price data inputs as of the close of business of the previous business day.  Marks do not include a bid-offer spread and other costs, reserves and adjustments that would be included in an actual market price.  In general, the proprietary computer valuation models used by Jefferies are based on appropriate discounting of the fixed and floating amounts as well as the appropriate projection of the floating amount and reflect assumptions by Jefferies regarding past, present and future credit and market conditions.  Because of these circumstances, a Mark will not necessarily be indicative of, and may be materially different from, the value which any other person might assign to the relevant swap or security-based swap, including a person that is affiliated with Jefferies.

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