INTL FCStone 2014 Annual Report Download - page 57

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INTL FCSTONE INC. Form 10K 41
PART II
ITEM 7 Management’s Discussion and Analysis of Financial Condition and Results of Operations
Securities
rough INTL FCStone Securities Inc., we provide value-added
solutions that facilitate cross-border trading. We believe our clients
value our ability to manage complex transactions, including
foreign exchange, utilizing our local understanding of market
convention, liquidity and settlement protocols around the world.
Our clients include U.S.-based regional and national broker-
dealers and institutions investing or executing client transactions
in international markets and foreign institutions seeking access
to the U.S. securities markets. We are one of the leading market
makers in foreign securities, including unlisted ADRs and foreign
ordinary shares. We make markets in approximately 800 ADRs
and foreign ordinary shares traded in the OTC market and will,
on request, make prices in more than 8,000 other ADRs and
foreign common shares. In addition, we are a broker-dealer in
Argentina where we are active in providing institutional executions
in the local capital markets.
We provide a full range of corporate finance advisory services to
our middle market clients, including capital market solutions
and a wide array of advisory services across a broad spectrum of
industries. Our advisory services span mergers and acquisitions,
liability management, restructuring opinions and valuations.
We also originate, structure and place a wide array of debt
instruments in the international and domestic capital markets.
ese instruments include complex asset-backed securities
(primarily in Argentina), unsecured bond and loan issues,
negotiable notes and other trade-related debt instruments used
in cross-border trade finance. On occasion, we may invest our
own capital in debt instruments before selling them. We also
actively trade in a variety of international debt instruments as
well as operate an asset management business in which we earn
fees, commissions and other revenues for management of third
party assets and investment gains or losses on our investments in
funds and proprietary accounts managed either by our investment
managers or by independent investment managers.
e following table provides the financial performance for Securities for the periods indicated.
(in millions)
Year Ended September 30,
2014 % Change 2013 % Change 2012
Operating revenues $ 80.3 15% $ 70.0 47% $ 47.6
Transaction-based clearing expenses 17.3 8% 16.0 45% 11.0
Introducing broker commissions 5.7 39% 4.1 128% 1.8
Interest expense 2.7 42% 1.9 533% 0.3
Net operating revenues 54.6 14% 48.0 39% 34.5
Variable direct compensation and benefits 13.7 32% 10.4 20% 8.7
Net contribution 40.9 9% 37.6 46% 25.8
Non-variable direct expenses 19.9 10% 18.1 —% 18.1
Segment income $ 21.0 8% $19.5 153% $ 7.7
e following table sets forth operating revenues by product line and selected data for Securities for the periods indicated.
Year Ended September 30,
2014 % Change 2013 % Change 2012
Operating revenues by product line (in millions):
Equity market-making $ 40.2 3% $ 39.1 56% $ 25.0
Debt trading 16.7 30% 12.8 51% 8.5
Investment banking 9.4 1% 9.3 45% 6.4
Asset management 14.0 59% 8.8 14% 7.7
$ 80.3 15% $ 70.0 47% $ 47.6
Selected data:
Equity market-making (gross dollar volume, millions) $ 74,162.9 29% $57,705.8 126% $ 25,553.8
Equity revenue per $100 traded $ 0.54 (21)% $0.68 (31)% $ 0.98
Average assets under management (millions) $ 530.9 15% $462.3 8% $ 428.6
For information about the assets of this segment, see Note 22 to the Consolidated Financial Statements.