INTL FCStone 2012 Annual Report Download - page 93
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PART II
ITEM 8 Financial Statements and Supplementary Data
Listed below are the fair values of the Company’s derivative assets and liabilities as of September30, 2012 and 2011. Assets represent
net unrealized gains and liabilities represent net unrealized losses.
(in millions)
September30, 2012
September30, 2011
Assets
(1) Liabilities
(1) Assets
(1) Liabilities
(1)
Derivative contracts not accounted for as hedges:
Exchange-traded commodity derivatives $ 3,325.6 $ 3,565.3 $ 7,074.2 $ 6,062.4
OTC commodity derivatives 823.6 841.4 763.7 780.1
Exchange-traded foreign exchange derivatives 63.0 47.7 126.9 89.8
OTC foreign exchange derivatives (2)(3) 215.4 196.6 1,074.3 1,118.9
Exchange-traded interest rate derivatives 0.9 2.6 2.3 2.8
OTC interest rate derivatives 1.6 — 3.2 —
Equity index derivatives 20.8 22.0 71.7 79.7
Gross fair value of derivative contracts 4,450.9 4,675.6 9,116.3 8,133.7
Impact of netting and collateral (4,548.1) (4,631.0) (9,262.6) (8,010.8
Total fair value included in ‘Deposits and receivables from
exchange- clearing organizations’ $ (150.4) $ (264.3)
Total fair value included in ‘Deposits and receivables from
broker- dealers, clearing organizations and counterparties’ $ (0.7) $ 16.1
Total fair value included in ‘Financial instruments owned,
at fair value’ $ 53.9 $ 101.9
Fair value included in ‘Financial instruments sold, not yet
purchased, at fair value’ $ 44.6 $ 122.9
(1) As of September30, 2012 and 2011, the Company’s derivative contract volume for open positions was approximately 4.1 million and 3.9 million contracts,
respectively.
(2) In accordance with agreements with counterparties, the Company is allowed to periodically take advances against its open trade fair value. These amounts exclude
advances against open trade fair value of $9.2 million and $0 outstanding as of September30, 2012 and 2011, respectively.
(3) In accordance with agreements with counterparties, the Company has to maintain a sufficient margin collateral balance based on the value of the open positions. These
amounts exclude deposits with the counterparties for margin collateral, which are included in netting and collateral line, of $0 and $53.5 million as of September30,
2012 and 2011, respectively.
e Company’s derivative contracts are principally held in its
Commodities and Risk Management Services (“C&RM”) segment.
e Company assists its C&RM segment customers in protecting
the value of their future production by entering into option or
forward agreements with them on an OTC basis. e Company
also provides its C&RM segment customers with option products,
including combinations of buying and selling puts and calls. e
Company mitigates its risk by generally o setting the customer’s
transaction simultaneously with one of the Company’s trading
counterparties or will o set that transaction with a similar but
not identical position on the exchange. e risk mitigation of
these o setting trades is not within the documented hedging
designation requirements of the Derivatives and Hedging Topic
of the ASC. ese derivative contracts are traded along with cash
transactions because of the integrated nature of the markets for
these products. e Company manages the risks associated with
derivatives on an aggregate basis along with the risks associated
with its proprietary trading and market-making activities in cash
instruments as part of its rm-wide risk management policies.
In particular, the risks related to derivative positions may be
partially o set by inventory, unrealized gains in inventory or
cash collateral paid or received.
e following table sets forth the Company’s net gains (losses)
related to derivative nancial instruments for the scal years
ended September30, 2012, 2011 and 2010, in accordance with
the Derivatives and Hedging Topic of the ASC. e net gains
(losses) set forth below are included within ‘trading gains, net’
in the consolidated income statements.
(in millions)
Year Ended September30,
2012 2011 2010
Commodities $ 65.7 $ 34.1 $ (19.1)
Foreign exchange 10.4 15.0 13.3
Interest rate 1.4 3.5 2.5
Net gains (losses) from derivative contracts $ 77.5 $ 52.6 $ (3.3)
Periodically, the Company uses interest rate swap contracts to
hedge certain forecasted transactions. e Company’s primary
objective in holding these types of derivatives is to reduce the
volatility of earnings and cash ows associated with changes in
interest rates. e Company had two interest rate swap contracts,
each with a notional amount of $50 million, that matured during
the scal year ended September30, 2011. e interest rate swap
contracts were entered into in order to hedge potential changes
in cash ows resulting from the Company’s variable rate LIBOR
based borrowings.