INTL FCStone 2014 Annual Report Download - page 20

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INTL FCSTONE INC. Form 10K4
PART I
ITEM 1 Business
Operating Segments
We divide our activities into five functional areas: Commercial Hedging, Global Payments, Securities, Physical Commodities and
Clearing and Execution Services.
Commercial Hedging
We serve our commercial clients through our team of risk
management consultants, providing a high-value-added service that
we believe differentiates us from our competitors and maximizes the
opportunity to retain our clients. Our risk management consulting
services are designed to quantify and monitor commercial entities’
exposure to commodity and financial risk. Upon assessing this
exposure, we develop a plan to control and hedge these risks with
post-trade reporting against specific client objectives. Our clients
are assisted in the execution of their hedging strategies through a
wide range of products from listed exchange-traded futures and
options, to basic OTC instruments that offer greater flexibility,
to structured OTC products designed for customized solutions.
Our services span virtually all traded commodity markets, with
the largest concentrations in agricultural and energy commodities
(consisting primarily of grains, energy and renewable fuels, coffee,
sugar, cotton, and food service) and base metals products listed
on the LME. Our base metals business includes a position as
a Category One ring dealing member of the LME, providing
execution, clearing and advisory services in exchange-traded
futures and OTC products. We also provide execution of foreign
currency forwards and options as well as a wide range of structured
product solutions to our commercial customers who are seeking
cost-effective hedging strategies. Generally, our clients direct
their own trading activity, and our risk management consultants
do not have discretionary authority to transact trades on behalf
of our clients.
Within this segment, our risk management consultants organize
their marketing efforts into customer industry product lines, and
currently serve customers in the following areas:
•
Financial Agricultural & Energy
–
Agricultural —
n
Grain elevator operators, grain merchandisers, traders,
processors, manufacturers and end-users.
n
Livestock production, feeding and processing, dairy and
users of agricultural commodities in the food industry.
n
Coffee, sugar and cocoa producers, processors and
end-users.
n
Global fiber, textile and apparel industry.
–
Energy and renewable fuels —
n
Producers, refiners, wholesalers, transportation
companies, convenience store chains, automobile and
truck fleet operators, industrial companies, railroads,
and municipalities.
n
Consumers of natural gas including some of the largest
natural gas consumers in North America, including
municipalities and large manufacturing firms, as well as
major utilities.
n
Ethanol and biodiesel producers and end-users.
–
Other —
n
Lumber mills, wholesalers, distributors and end-users.
n
Commercial entities seeking to hedge their foreign exchange
exposures.
•
LME Metals
–
Commercial —
n
Producers, consumers and merchants of copper, aluminum,
zinc, lead, nickel, tin and other ferrous products.
–
Institutional —
n
Commodity trading advisors and hedge funds seeking
clearing and execution of LME and NYMEX/COMEX
base metal products.
Global Payments
We provide global payment solutions to banks and commercial
businesses as well as charities and non-governmental organizations
and government organizations. We offer payments services in
more than 150 countries, which we believe is more than any
other payments solution provider, and provide competitive
and transparent pricing. rough our technology platform,
full-service electronic execution capability and commitment to
customer service, we believe we are able to provide simple and
fast execution, ensuring delivery of funds in any of these countries
quickly through our global network of correspondent banks. In
this business, we primarily act as a principal in buying and selling
foreign currencies on a spot basis. We derive revenue from the
difference between the purchase and sale prices.
We believe our clients value our ability to provide exchange rates
that are significantly more competitive than those offered by large
international banks, a competitive advantage that stems from
our years of foreign exchange expertise focused on smaller, less
liquid currencies. Additionally, as a member of SWIFT (Society
for Worldwide Interbank Financial Telecommunication), we
are able to offer our services to large money center and global
banks seeking more competitive international payments services.