INTL FCStone 2014 Annual Report Download - page 24

INTL FCSTONE INC.  Form 10K8
PART I
and indirectly through firms like us. We compete in the OTC
market by making specialized OTC transactions available to our
customers in contract sizes that are smaller than those usually
available from major counterparties.
Investor interest in the markets we serve impact and will continue
to impact our activities. e instruments traded in these markets
compete with a wide range of alternative investment instruments.
We seek to counterbalance changes in demand in specified markets
by undertaking activities in multiple uncorrelated markets.
Technology has increased competitive pressures on commodities
and financial intermediaries by improving dissemination of
information, making markets more transparent and facilitating
the development of alternative execution mechanisms. In certain
instances, we compete by providing technology-based solutions
to facilitate customer transactions and solidify customer
relationships.
Administration and Operations
We employ operations personnel to supervise and, for certain
products, complete the clearing and settlement of transactions.
INTL FCStone Securities’ securities transactions are cleared through
Broadcourt, a division of Merrill Lynch, Pierce, Fenner & Smith,
Inc and Pershing LLC, a subsidiary of e Bank of New York
Mellon Corporation. INTL FCStone Securities does not hold
customer funds or directly clear or settle securities transactions.
We utilize front-end electronic trading, back office and accounting
systems to process transactions on a daily basis. In some cases
these systems are integrated. e systems provide record keeping,
trade reporting to exchange clearing, internal risk controls, and
reporting to government and regulatory entities, corporate
managers, risk managers and customers. A third-party service
bureau located in Chicago, Illinois maintains our futures and
options back office system. It has a disaster recovery site in New
York, New York.
We hold customer funds in relation to certain of our activities.
In regulated entities, these customer funds are segregated, but
in unregulated entities they are not. For a further discussion of
customer segregated funds in our regulated entities, please see
the “Customer Segregated Assets” discussion below.
Our administrative staff manages our internal financial controls,
accounting functions, office services and compliance with
regulatory requirements.
Governmental Regulation and Exchange Membership
Our activities are subject to significant governmental regulation,
both in the U.S. and overseas. Failure to comply with regulatory
requirements could result in administrative or court proceedings,
censure, fines, issuance of cease-and-desist orders, or suspension
or disqualification of the regulated entity, its officers, supervisors
or representatives. e regulatory environment in which we
operate is subject to frequent change and these changes directly
impact our business and operating results.
e commodities industry in the U.S. is subject to extensive
regulation under federal law. We are required to comply with a
wide range of requirements imposed by the Commodity Futures
Trading Commission (the “CFTC”), the National Futures
Association (the “NFA”) and the Chicago Mercantile Exchange,
which is our designated self-regulatory organization. We are also
a member of the Chicago Mercantile Exchange’s divisions: the
Chicago Board of Trade, the New York Mercantile Exchange and
COMEX, ICE Futures US, ICE Europe Ltd, and the Minneapolis
Grain Exchange. ese regulatory bodies protect customers by
imposing requirements relating to capital adequacy, licensing of
personnel, conduct of business, protection of customer assets,
record-keeping, trade-reporting and other matters.
e securities industry in the U.S. is subject to extensive regulation
under federal and state securities laws. We must comply with
a wide range of requirements imposed by the Securities and
Exchange Commission (the “SEC”), state securities commissions
and Financial Industry Regulatory Authority (“FINRA”). ese
regulatory bodies safeguard the integrity of the financial markets
and protect the interests of investors in these markets. ey also
impose minimum capital requirements on regulated entities. e
activities of our broker-dealer subsidiaries in the U.S., INTL
FCStone Securities and FCC Investments, Inc., are primarily
regulated by FINRA and the SEC.
e Financial Conduct Authority (“FCA”), the regulator of the
financial services industry in the United Kingdom, regulates
our subsidiary, INTL FCStone Ltd, as a Financial Services Firm
under part IV of the Financial Services and Markets Act 2000.
e regulations impose daily regulatory capital, as well as conduct
of business, governance, and other requirements. e conduct of
business rules include those that govern the treatment of client
money and other assets which, under certain circumstances for
certain classes of clients must be segregated from the firm’s own assets.
e Dodd-Frank Wall Street Reform and Consumer Protection Act
(the “Dodd-Frank Act”) created a comprehensive new regulatory
regime governing the OTC and listed derivatives markets and
their participants by requiring, among other things: centralized
clearing of standardized derivatives (with certain stated exceptions);
ITEM 1 Business