INTL FCStone 2005 Annual Report Download - page 12

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Business Strategy
The Company seeks to deploy its capital and expertise in financial markets that exhibit one or more of the
following characteristics:
• niche markets that are not adequately covered by major brokerage firms and financial institutions
• markets that require specialized expertise
• markets that are primarily trading-oriented
• markets that primarily serve wholesale customers
• markets that have a significant international component
The Company currently operates in four business segments that fulfill the objectives of its business strategy
— international equities market-making, international debt capital markets, commodities/foreign exchange
trading and asset management. The Company continues to evaluate other market niches for expansion
opportunities.
Each of the Company’s businesses is highly volatile and can change due to a variety of factors which are
both outside of management’s control and not readily predictable. To address this volatility, the Company has
sought to diversify into a number of uncorrelated businesses.
As a financial intermediary in these niche businesses, the Company’s primary focus is to recruit experienced
individuals who bring with them knowledge and relationships in these businesses and to ensure that costs are
linked to revenues to limit the possibility of losses. Management evaluates the profitability of each area before
and after direct trading and compensation costs and periodically reviews the net contribution made relative to
committed capital resources.
Trading Revenues
In the Company’s business, purchases of individual securities, currencies, commodities or derivative
instruments may be from single or multiple customers or counterparties. They may be covered by a matching sale
to a customer or counterparty or may be aggregated with other purchases to provide liquidity intraday, for a
number of days or, in some cases, even longer periods of time (during which periods market values may
fluctuate). Sales of individual securities, currencies, commodities or derivative instruments may also be from
single or multiple customers or counterparties. They may be made from inventory, they may be covered by a
simultaneous and matching purchase in the market or they may represent a short sale and be covered by a later
purchase in the market.
While the Company is able to track the number and dollar amount of individual transactions with each
customer, this information is not a reliable indicator of revenues because it is not necessarily proportional to
revenues or profitability. Depending on the nature of the instrument traded, market conditions and timing of a
transaction, revenues and profitability may differ widely from trade to trade and from customer to customer.
International Equities Market-Making
The Company is a leading U.S. market-maker in select foreign securities, including unlisted ADRs, foreign
common shares and OTC domestic bulletin board stocks. The Company conducts these activities through INTL
Trading, which provides execution services and liquidity to national broker-dealers, regional broker-dealers and
institutional investors. The Company focuses on those international equities in which the Company can use its
expertise and experience to provide customers with competitive execution and superior service. The Company
also utilizes its proprietary technology, including internet technology, to achieve these goals.
The Company makes markets in approximately 350 ADRs and foreign ordinary shares traded in the OTC
market, and in approximately 1,100 domestic bulletin board stocks. In addition, the Company will, on request,
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