INTL FCStone 2012 Annual Report Download - page 21
Download and view the complete annual report
Please find page 21 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.Form10K 5
PART I
ITEM 1 Business
Accounting Standards Codi cation (“ASC”). e Company
generally mitigates the price risk associated with commodities
held in inventory through the use of derivatives. e Company
does not elect hedge accounting under accounting principles
generally accepted in the U.S. (“U.S. GAAP”) in accounting for
this price risk mitigation. In such situations, unrealized gains in
inventory are not recognized under U.S. GAAP, but unrealized
gains and losses in related derivative positions are recognized
under U.S. GAAP. As a result, the Company’s reported earnings
from commodities trading may be subject to signi cant volatility
when calculated under U.S. GAAP.
Foreign Exchange
e Company provides treasury, global payment and foreign
exchange services to nancial institutions, multi-national
corporations, government organizations and charitable
organizations. We also assist commercial customers with the
execution of foreign exchange hedging strategies. e Company
transacts in over 130 currencies and specializes in smaller, more
di cult emerging markets where there is limited liquidity. In
addition, the Company executes trades based on the foreign
currency ows inherent in the Company’s existing business
activities. e Company primarily acts as a principal in buying
and selling foreign currencies on a spot basis. e Company
derives revenue from the di erence between the purchase and
sale prices.
e Company also provides spot foreign currency trading for
eligible contract participants and high net worth retail customers
and operates a proprietary foreign exchange desk which arbitrages
the futures and cash markets.
Securities
rough INTL FCStone Securities Inc. (“INTL FCStone
Securities”), a registered broker-dealer, the Company acts as a
wholesale market maker in select foreign securities including
unlisted ADRs and foreign ordinary shares and provides execution
in select debt instruments and exchange traded funds (“ETFs”).
INTL FCStone Securities provides execution and liquidity to
national and regional broker-dealers and institutional investors.
e Company makes markets in approximately 800 ADRs and
foreign ordinary shares traded in the OTC market. In addition,
the Company will, on request, make prices in more than 8,000
other ADRs and foreign common shares. As a market maker, the
Company provides trade execution services by o ering to buy
shares from, or sell shares to, broker-dealers and institutions. e
Company displays the prices at which it is willing to buy and
sell these securities and adjusts its prices in response to market
conditions. When acting as principal, the Company commits its
own capital and derives revenue from the di erence between the
prices at which the Company buys and sells shares. e Company
also earns commissions by executing trades on an agency basis.
While the Company’s customers are other broker-dealers and
institutions, the business tends to be driven by the needs of the
private clients of those broker-dealers and institutions. e size
of private client trades may be uneconomical for the in-house
international equities trading desks of our customers to execute.
e Company is able to provide execution of smaller trades at
pro table margins.
We provide commercial customers with a full range of investment
banking services from optimizing the customer’s capital structure
through the issuance of loans, debt or equity securities and advisory
services including mergers, acquisitions and restructurings. e
Company seeks to market these services to our existing commercial
customer base, particularly in North and South America, and to
develop new customer relationships with whom we can cross-sell
our full suite of nancial services. From time-to-time, we may
invest our own capital in debt instruments before selling them
into the market.
Clearing and Execution Services (“CES”)
We provide competitive and e cient clearing and execution of
exchange-traded futures and options-on-futures for the institutional
and professional traders through our subsidiary, FCStone, LLC.
rough its platform, customer orders are accepted and directed
to the appropriate exchange for execution. e Company then
facilitates the clearing of customers’ transactions. Clearing
involves the matching of customers’ trades with the exchange,
the collection and management of margin deposits to support the
transactions, and the accounting and reporting of the transactions
to customers. e Company seeks to leverage its capabilities
and capacity by o ering facilities management or outsourcing
solutions to other FCMs.
FCStone, LLC is a registered FCM and a clearing member of all
major U.S. commodity futures exchanges including the Chicago
Mercantile Exchange and its divisions: the Chicago Board of Trade,
the New York Mercantile Exchange and the COMEX Division;
InterContinental Exchange, Inc. (“ ICE” ) Futures US, formerly
known as the New York Board of Trade, the Kansas City Board
of Trade and the Minneapolis Grain Exchange (“MGEX”). As
of September30, 2012 , FCStone, LLC was the third largest
independent FCM in the United States, as measured by required
customer segregated assets, not a liated with a major nancial
institution or commodity intermediary, end-user or producer.
As of September30, 2012 , FCStone, LLC had $1.6 billion in
required customer segregated assets.
Other
is segment consists of the Company’s asset management
and commodity nancing and facilitation business. e asset
management revenues include fees, commissions and other
revenues received by the Company for management of third-
party assets and investment gains or losses on the Company’s