INTL FCStone 2005 Annual Report Download - page 34

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movements, price volatility and changes in liquidity, over which the Company has virtually no control. The
Company’s exposure to market risk varies in accordance with the volume of customer-driven market-making
transactions, the size of the proprietary positions and the volatility of the financial instruments traded.
We seek to mitigate exposure to market risk by utilizing a variety of qualitative and quantitative techniques:
• diversification of business activities and instruments
• limitations on positions
• allocation of capital and limits based on estimated weighted risks
• daily monitoring of positions and mark-to-market profitability
The Company utilizes derivative products in a trading capacity as a dealer, to satisfy customer needs and
mitigate risk. The Company manages risks from both derivatives and non-derivative cash instruments on a
consolidated basis. The risks of derivatives should not be viewed in isolation, but in aggregate with the
Company’s other trading activities.
Management believes that the volatility of revenues is a key indicator of the effectiveness of its risk
management techniques. The graph below summarizes volatility of daily revenue during fiscal year 2005.
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