INTL FCStone 2012 Annual Report Download - page 20
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Please find page 20 of the 2012 INTL FCStone annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.INTL FCSTONE INC.Form10K4
PART I
ITEM 1 Business
Operating Segments
e Company’s activities are divided into ve functional areas consisting of Commodity and Risk Management Services, Foreign
Exchange, Securities, Clearing and Execution Services, and Other.
Commodity and Risk Management Services
(“C&RM”)
We serve our commercial customers by providing high value-
added-service that differentiates the Company from our
competitors and maximizes the opportunity to retain customers.
e IRMP provides customers with commodity risk management
consulting services that are designed to develop a customized long
term hedging program to help them mitigate their exposure to
commodity price risk and maximize the amount and certainty
of their operating pro ts. Customers are assisted in the execution
of their hedging strategies through the Company’s exchange-
traded futures and options-on-futures clearing and execution
operations and through access to more customized alternatives
provided by our OTC trading desk. Generally, customers direct
their own trading activity and risk management consultants do
not have discretionary authority to transact trades on behalf of
customers. When transacting OTC contracts with a customer,
the Company mitigates its risk by o setting the customer’s
transaction simultaneously with one of its trading counterparties
or with a similar but not identical position on the exchange.
We also provide a full range of trading and hedging capabilities
to select producers, consumers, recyclers and investors in precious
and base metals, as well as certain other related commodities.
is includes acting as a Category One ring dealing member of
the London Metals Exchange (“ LME” ) and providing execution,
clearing and advisory services in exchange traded futures and
OTC products. Acting as a principal, we commit our own capital
to buy and sell the metals on a spot and forward basis.
e risk management consultants organize their marketing e orts
within this segment into customer industry product lines, and
currently serve customers in the following areas:
•
Commercial Grain — Customers in this product line include
grain elevator operators, traders, processors, manufacturers
and end-users.
•
Energy — e energy customer product line targets companies
where energy represents a signi cant input cost in the production
of their product or service. Customers in this product line include
producers, re ners, wholesalers, transportation companies,
convenience store chains, automobile and truck eet operators,
industrial companies, railroads and municipalities.
•
Renewable Fuels — e renewable fuels customer product
line targets producers of ethanol and biodiesel products.
•Latin America/Brazil — e customers within this product
line are involved in all sectors of agribusiness, including livestock
production and feeding, our milling and baking, oilseed
crushing and re ning, co ee, grain merchandising, meat
processing and sugar/ethanol production.
•
China — e China customer product line represents both
Chinese future commission merchants (“FCMs”) as well as
commercial companies seeking to hedge their commodity
risk exposures. e Chinese FCMs are similar to introducing
brokers, facilitating the transactions of their clients in the U.S.
commodities markets. e commercial accounts generally
represent signi cant processors of grain or other commodities.
•
Dairy/Food Service — e dairy and food service product line
targets the dairy industry and users of agricultural commodities
in the food industry.
•
Cotton/Textiles — e cotton product line targets both the
domestic and international markets with a focus on providing
trading, consulting and information services to the global ber,
textile and apparel industry.
•
Precious Metals — is product line targets mining producers
and scrap merchants, as well as wholesale jewelry manufactures
and other commercial customers globally.
•
Base Metals — is product line has relationships with a
number of small and medium-sized metals producers, re ners,
recyclers, traders and manufacturing entities. In addition,
through our LME operations we serve institutional investors
and nancial services rms in the Americas, Europe and the
Asia-Paci c region.
•
Natural Gas — is product line focuses on consumers of
natural gas and has relationships with some of the largest natural
gas consumers in North America, including municipalities and
large manufacturing rms, as well as major utilities.
•
Introducing Brokers — e customers within this product
line include introducing brokers that maintain relationships
with customers and intermediate transactions between these
customers and FCStone, LLC, our wholly owned FCM. e
customers within this product line are primarily agricultural
producers.
e Company records all of its physical commodities revenues on
a gross basis. Operating revenues and losses from the Company’s
commodities derivatives activities are included within ‘trading
gains, net’ in the consolidated income statements. Inventory
for the commodities business is valued at the lower of cost or
fair value, under the provisions of the Inventory Topic of the