UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

____________________

FORM 10-Q

____________________

(Mark One)



x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended ~~June 30, 2018~~March 31, 2019



o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Transition Period From to

Commission File Number 000-23554

~~____________________~~

INTL FCStone Inc.

(Exact name of registrant as specified in its charter)

~~____________________~~



Delaware		59-2921318
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

~~708 Third Avenue,~~155 East 44th Street, Suite 1500

New York, NY 10017

(Address of principal executive offices) (Zip Code)

(212) 485-3500

(Registrant’s telephone number, including area code)

~~____________________~~

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.



Large accelerated filer	o		Accelerated filer	x

Non-accelerated filer	o	(Do not check if a smaller reporting company)	Smaller reporting company	o

			Emerging growth company	o

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x

Securities registered pursuant to Section 12(b) of the Act:



Title of Each Class	Trading Symbol	Name of each exchange on which registered
Common Stock, $0.01 par value	INTL	The Nasdaq Stock Market LLC

As of ~~August 2, 2018~~,May 6, 2019, there were ~~18,906,669~~19,128,030 shares of the registrant’s common stock outstanding.

INTL FCStone Inc.

Quarterly Report on Form 10-Q for the Quarterly Period Ended ~~June 30, 2018~~March 31, 2019

Table of Contents



		Page
Part I. FINANCIAL INFORMATION

Item 1.	Financial Statements (Unaudited)

	Condensed Consolidated Balance Sheets	1

	Condensed Consolidated Income Statements	2

	Condensed Consolidated Statements of Comprehensive Income	3

	Condensed Consolidated Statements of Cash Flows	4

	Condensed Consolidated ~~Statement~~Statements of Stockholders’ Equity	56

	Notes to Condensed Consolidated Financial Statements	67

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	2836

Item 3.	Quantitative and Qualitative Disclosures about Market Risk	5463

Item 4.	Controls and Procedures	5665

Part II. OTHER INFORMATION

Item 1.	Legal Proceedings	5665

Item 1A.	Risk Factors	5765

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	5766

Item 6.	Exhibits	5766

Signatures		5866

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

INTL FCStone Inc.

Condensed Consolidated Balance Sheets

(Unaudited)


(in millions, except par value and share amounts)	June 30, 2018			September 30, 2017			March 31, 2019			September 30, 2018
ASSETS
Cash and cash equivalents	$	347.8		$	314.9		$	274.4		$	342.3
Cash, securities and other assets segregated under federal and other regulations (including $675.4 and $54.5 at fair value at June 30, 2018 and September 30, 2017, respectively)	1,212.6			518.8
Cash, securities and other assets segregated under federal and other regulations (including $235.8 and $643.3 at fair value at March 31, 2019 and September 30, 2018, respectively)							959.0			1,408.7
Collateralized transactions:
Securities purchased under agreements to resell	769.6			406.6			1,242.4			870.8
Securities borrowed	176.3			86.6			1,289.8			225.5
Deposits with and receivables from broker-dealers, clearing organizations and counterparties (including $716.4 and $204.7 at fair value at June 30, 2018 and September 30, 2017, respectively)	2,165.2			2,625.1
Receivables from customers, net	218.5			232.7
Notes receivable	11.0			10.6
Deposits with and receivables from broker-dealers, clearing organizations and counterparties, net (including $422.7 and $517.4 at fair value at March 31, 2019 and September 30, 2018, respectively)							2,266.8			2,234.5
Receivables from clients, net							305.3			288.0
Notes receivable, net							2.6			3.8
Income taxes receivable	0.2			0.4			0.3			0.3
Financial instruments owned, at fair value (includes securities pledged as collateral that can be sold or repledged of $17.3 and $19.4 at June 30, 2018 and September 30, 2017, respectively)	2,003.4			1,731.8
Physical commodities inventory, net (including $111.1 and $73.2 at fair value at June 30, 2018 and September 30, 2017, respectively)	212.8			124.8
Financial instruments owned, at fair value (includes securities pledged as collateral that can be sold or repledged of $285.5 and $123 at March 31, 2019 and September 30, 2018, respectively)							2,596.7			2,054.8
Physical commodities inventory, net (including $202.9 and $156.9 at fair value at March 31, 2019 and September 30, 2018, respectively)							279.8			222.5
Deferred income taxes, net	22.7			42.6			22.8			19.8
Property and equipment, net	41.0			38.7			45.6			42.4
Goodwill and intangible assets, net	56.4			59.4			59.4			59.8
Other assets	47.4			50.4			62.8			51.5
Total assets	$	7,284.9		$	6,243.4		$	9,407.7		$	7,824.7
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Accounts payable and other accrued liabilities (including $1.0 at fair value at September 30, 2017)	$	128.1		$	135.6
Accounts payable and other accrued liabilities							$	128.3		$	145.4
Payables to:
Customers	3,354.7			3,072.9
Broker-dealers, clearing organizations and counterparties (including $7.1 and $4.8 at fair value at June 30, 2018 and September 30, 2017, respectively)	130.8			125.7
Clients							2,994.6			3,639.6
Broker-dealers, clearing organizations and counterparties (including $15.8 and $0 at fair value at March 31, 2019 and September 30, 2018, respectively)							575.2			89.5
Lenders under loans	360.6			230.2			256.8			355.2
Senior secured term loan, net							171.8			—
Income taxes payable	12.5			7.3			11.3			8.6
Collateralized transactions:
Securities sold under agreements to repurchase	1,599.0			1,393.1			2,384.7			1,936.7
Securities loaned	204.3			111.1			1,376.5			277.9
Financial instruments sold, not yet purchased, at fair value	1,007.2			717.6			956.7			866.5
Total liabilities	6,797.2			5,793.5			8,855.9			7,319.4
Commitments and contingencies (Note 11)
Stockholders' Equity:
Commitments and contingencies (Note 12)
Stockholders' equity:
Preferred stock, $0.01 par value. Authorized 1,000,000 shares; no shares issued or outstanding	—			—			—			—
Common stock, $0.01 par value. Authorized 30,000,000 shares; 21,012,531 issued and 18,890,574 outstanding at June 30, 2018 and 20,855,243 issued and 18,733,286 outstanding at September 30, 2017	0.2			0.2
Common stock in treasury, at cost - 2,121,957 shares at June 30, 2018 and September 30, 2017	(46.3		)	(46.3		)
Additional paid-in capital	265.7			259.0
Common stock, $0.01 par value. Authorized 30,000,000 shares; 21,218,132 issued and 19,096,175 outstanding at March 31, 2019 and 21,030,497 issued and 18,908,540 outstanding at September 30, 2018							0.2			0.2
Common stock in treasury, at cost - 2,121,957 shares at March 31, 2019 and September 30, 2018							(46.3		)	(46.3		)
Additional paid-in-capital							272.1			267.5
Retained earnings	301.3			261.5			358.6			317.0
Accumulated other comprehensive loss, net	(33.2		)	(24.5		)	(32.8		)	(33.1		)
Total stockholders' equity	487.7			449.9			551.8			505.3
Total liabilities and stockholders' equity	$	7,284.9		$	6,243.4		$	9,407.7		$	7,824.7

See accompanying notes to condensed consolidated financial statements.

INTL FCStone Inc.

Condensed Consolidated Income Statements

(Unaudited)


	Three Months Ended June 30,				Nine Months Ended June 30,				Three Months Ended March 31,				Six Months Ended March 31,
(in millions, except share and per share amounts)	2018		2017		2018		2017		2019		2018		2019			2018
Revenues:
Sales of physical commodities	$	6,866.2	$	5,317.0	$	20,836.4	$	16,486.3	$	6,929.5	$	6,255.8	$	13,225.3		$	13,970.2
Trading gains, net	103.4		79.9		296.9		246.9
Principal gains, net									110.3		98.5		203.1			175.6
Commission and clearing fees	96.6		73.0		271.6		212.5		85.1		106.4		184.6			192.9
Consulting, management, and account fees	18.3		16.3		53.2		47.5		19.1		18.4		38.2			35.0
Interest income	33.7		19.6		85.6		47.7		48.2		27.9		93.2			51.9
Other income	0.1		0.1		0.2		0.2
Total revenues	7,118.3		5,505.9		21,543.9		17,041.1		7,192.2		6,507.0		13,744.4			14,425.6
Cost of sales of physical commodities	6,858.5		5,308.3		20,811.3		16,462.2		6,921.1		6,246.8		13,208.6			13,952.8
Operating revenues	259.8		197.6		732.6		578.9		271.1		260.2		535.8			472.8
Transaction-based clearing expenses	49.0		33.9		136.6		101.2		42.7		50.7		92.8			87.6
Introducing broker commissions	34.1		29.2		101.4		86.1		24.8		36.2		57.4			67.3
Interest expense	22.1		11.2		55.4		30.1		38.4		19.0		71.4			33.3
Net operating revenues	154.6		123.3		439.2		361.5		165.2		154.3		314.2			284.6
Compensation and other expenses:
Compensation and benefits	86.9		75.5		252.3		222.7		97.9		88.2		187.0			165.4
Trading systems and market information	8.6		8.3		25.7		25.7		9.5		8.9		18.7			17.1
Occupancy and equipment rental	4.2		3.9		12.5		11.1		5.0		4.2		9.4			8.3
Professional fees	4.8		3.7		13.4		11.9		5.0		3.9		10.3			8.6
Travel and business development	3.7		3.0		10.2		9.6		4.0		3.0		7.8			6.5
Non-trading technology and support	3.8		3.2		10.3		8.9		5.0		3.4		9.2			6.5
Depreciation and amortization	2.8		2.4		8.4		7.2		3.2		2.9		6.1			5.6
Communications	1.3		1.5		4.1		3.9		2.0		1.4		3.3			2.8
Bad debts	1.6		0.1		2.9		3.9		0.7		0.2		1.0			0.3
(Recovery) bad debt on physical coal									—		—		(2.4		)	1.0
Other	6.0		6.7		20.4		18.9		7.4		8.7		13.9			14.4
Total compensation and other expenses	123.7		108.3		360.2		323.8		139.7		124.8		264.3			236.5
Other gain	2.0		—		2.0		—		5.4		—		5.4			—
Income before tax	32.9		15.0		81.0		37.7		30.9		29.5		55.3			48.1
Income tax expense	8.9		2.3		41.2		7.7		7.5		6.8		13.7			32.3
Net income	$	24.0	$	12.7	$	39.8	$	30.0	$	23.4	$	22.7	$	41.6		$	15.8
Earnings per share:
Basic	$	1.27	$	0.67	$	2.10	$	1.59	$	1.23	$	1.20	$	2.19		$	0.83
Diluted	$	1.25	$	0.66	$	2.06	$	1.58	$	1.21	$	1.18	$	2.15		$	0.81
Weighted-average number of common shares outstanding:
Basic	18,597,165		18,447,053		18,524,846		18,365,939		18,753,490		18,559,849		18,706,104			18,502,795
Diluted	18,976,898		18,702,128		18,876,259		18,659,138		19,004,793		18,859,333		18,999,889			18,836,213

See accompanying notes to condensed consolidated financial statements.

INTL FCStone Inc.

Condensed Consolidated Statements of Comprehensive Income

(Unaudited)


	Three Months Ended June 30,						Nine Months Ended June 30,						Three Months Ended March 31,					Six Months Ended March 31,
(in millions)	2018			2017			2018			2017			2019		2018			2019		2018
Net income	$	24.0		$	12.7		$	39.8		$	30.0		$	23.4	$	22.7		$	41.6	$	15.8
Other comprehensive loss, net of tax:
Other comprehensive (loss) income, net of tax:
Foreign currency translation adjustment	(4.9		)	(1.9		)	(8.7		)	(2.1		)	—		(1.6		)	0.3		(3.8		)
Other comprehensive loss	(4.9		)	(1.9		)	(8.7		)	(2.1		)
Other comprehensive (loss) income													—		(1.6		)	0.3		(3.8		)
Comprehensive income	$	19.1		$	10.8		$	31.1		$	27.9		$	23.4	$	21.1		$	41.9	$	12.0

See accompanying notes to condensed consolidated financial statements.

INTL FCStone Inc.

Condensed Consolidated Statements of Cash Flows

(Unaudited)



	Six Months Ended March 31,
(in millions)	2019			2018
Cash flows from operating activities:
Net income	$	41.6		$	15.8
Adjustments to reconcile net income to net cash used in operating activities:
Depreciation and amortization	6.1			5.6
Bad debts	1.0			0.3
(Recovery) bad debt on physical coal	(2.4		)	1.0
Deferred income taxes	(0.4		)	18.6
Amortization of debt issuance costs	0.8			0.5
Amortization of share-based compensation	3.8			3.2
Bargain purchase gain on acquisition	(5.4		)	—
Changes in operating assets and liabilities, net:
Securities and other assets segregated under federal and other regulations	407.5			(585.1		)
Securities purchased under agreements to resell	(371.6		)	(198.1		)
Securities borrowed	(1,064.3		)	(433.3		)
Deposits with and receivables from broker-dealers, clearing organizations, and counterparties	5.8			10.0
Receivables from clients, net	(17.2		)	(72.0		)
Notes receivable, net	1.2			(1.9		)
Income taxes receivable	0.1			(0.6		)
Financial instruments owned, at fair value	(534.8		)	(125.2		)
Physical commodities inventory, net	(57.3		)	(162.5		)
Other assets	(9.6		)	3.1
Accounts payable and other accrued liabilities	(19.7		)	1.5
Payables to clients	(642.6		)	195.6
Payables to broker-dealers, clearing organizations and counterparties	485.4			(51.0		)
Income taxes payable	2.7			4.5
Securities sold under agreements to repurchase	448.0			169.5
Securities loaned	1,098.6			448.0
Financial instruments sold, not yet purchased, at fair value	85.8			104.1
Net cash used in operating activities	(136.9		)	(648.4		)
Cash flows from investing activities:
Cash paid for acquisitions, net	(7.8		)	—
Purchase of property and equipment	(7.3		)	(6.9		)
Net cash used in investing activities	(15.1		)	(6.9		)
Cash flows from financing activities:
Net change in payable to lenders under loans	(98.0		)	110.7
Proceeds from issuance of senior secured term loan	175.0			—
Payment of senior secured term loan	(2.2		)	—
Payments of note payable	(0.4		)	(0.4		)
Deferred payments on acquisitions	—			(5.5		)
Debt issuance costs	(3.2		)	(0.1		)
Exercise of stock options	0.8			2.2
Withholding taxes on stock option exercises	—			(0.8		)
Net cash provided by financing activities	72.0			106.1
Effect of exchange rates on cash, segregated cash, cash equivalents, and segregated cash equivalents	0.3			(1.7		)
Net decrease in cash, segregated cash, cash equivalents, and segregated cash equivalents	(79.7		)	(550.9		)
Cash, segregated cash, cash equivalents, and segregated cash equivalents at beginning of period	2,190.1			2,601.4
Cash, segregated cash, cash equivalents, and segregated cash equivalents at end of period	$	2,110.4		$	2,050.5
Supplemental disclosure of cash flow information:
Cash paid for interest	$	69.8		$	32.5
Income taxes paid, net of cash refunds	$	11.3		$	9.8
Supplemental disclosure of non-cash investing and financing activities:
Identified intangible assets from business acquisition	$	2.7		$	—
Acquisition of business:
Assets acquired	$	25.9		$	—
Liabilities assumed	(7.3		)	—
Total net assets acquired	$	18.6		$	—
Escrow deposits related to acquisitions	$	2.5		$	—

See accompanying notes to condensed consolidated financial statements.

INTL FCStone Inc.

Condensed Consolidated Statements of Cash Flows - Continued

(Unaudited)

The following table provides a reconciliation of cash, segregated cash, cash equivalents, and segregated cash equivalents reported within the condensed consolidated balance sheets.

Nine Months Ended June 30,
(in millions) 2018 2017
Cash flows from operating activities:
Net income $ 39.8
$ 30.0
Adjustments to reconcile net income to net cash used in operating activities:
Depreciation and amortization 8.4
7.2
Bad debts 2.9
3.9
Deferred income taxes 19.7
(5.8 )
Amortization of debt issuance costs 0.8
1.7
Amortization of share-based compensation 4.9
4.6
Gain on sale of property and equipment —
(0.3 )
Changes in operating assets and liabilities, net:
Cash, securities and other assets segregated under federal and other regulations (731.0 ) 458.8
Securities purchased under agreements to resell (363.4 ) 87.9
Securities borrowed (89.7 ) (112.7 )
Deposits with and receivables from broker-dealers, clearing organizations, and counterparties 409.7
(432.1 )
Receivables from customers, net 22.5
(87.2 )
Notes receivable (0.4 ) 9.8
Income taxes receivable (0.8 ) (0.4 )
Financial instruments owned, at fair value (254.0 ) (174.6 )
Physical commodities inventory, net (89.0 ) (48.9 )
Other assets 1.5
0.5
Accounts payable and other accrued liabilities 1.5
(13.3 )
Payables to customers 319.7
(4.8 )
Payables to broker-dealers, clearing organizations and counterparties 10.0
(65.4 )
Income taxes payable 6.4
1.7
Securities sold under agreements to repurchase 206.0
291.2
Securities loaned 93.2
130.5
Financial instruments sold, not yet purchased, at fair value 294.2
(97.2 )
Net cash used in operating activities (87.1 ) (14.9 )
Cash flows from investing activities:
Cash paid for acquisitions, net —
(6.0 )
Purchase of property and equipment (9.3 ) (8.6 )
Net cash used in investing activities (9.3 ) (14.6 )
Cash flows from financing activities:
Net change in payable to lenders under loans 131.0
62.5
Repayment of senior unsecured notes —
(45.5 )
Payments of note payable (0.6 ) (0.6 )
Deferred payments on acquisitions (5.5 ) —
Debt issuance costs (0.4 ) (0.3 )
Exercise of stock options 2.6
3.1
Withholding taxes on stock option exercises (0.8 )

Income tax benefit on stock options and awards —
(0.2 )
Net cash provided by financing activities 126.3
19.0
Effect of exchange rates on cash and cash equivalents 3.0
0.4
Net increase (decrease) in cash and cash equivalents 32.9
(10.1 )
Cash and cash equivalents at beginning of period 314.9
316.2
Cash and cash equivalents at end of period $ 347.8
$ 306.1
Supplemental disclosure of cash flow information:
Cash paid for interest $ 54.2
$ 27.2
Income taxes paid, net of cash refunds $ 15.8
$ 12.4
Supplemental disclosure of non-cash investing and financing activities:
Identified intangible assets from asset acquisition $ —
$ 6.0



	March 31
(in millions)	2019		2018
Cash and cash equivalents	$	274.4	$	336.0
Cash segregated under federal and other regulations⁽¹⁾	723.3		635.9
Securities segregated under federal and other regulations⁽¹⁾	—		0.5
Cash segregated and deposited with or pledged to exchange-clearing organizations and other futures commission merchants (“FCMs”)⁽²⁾	993.9		668.6
Securities segregated and pledged to exchange-clearing organizations⁽²⁾	118.8		409.5
Total cash, segregated cash, cash equivalents, and segregated cash equivalents shown in the condensed consolidated statements of cash flows	$	2,110.4	$	2,050.5

⁽¹⁾Represents segregated client cash held at third-party banks. Excludes segregated commodity warehouse receipts, segregated United States (“U.S.”) Treasury obligations with original or acquired maturities of greater than 90 days, and other assets of $235.7 million and $615.0 million as of March 31, 2019 and 2018, respectively, included within ‘Cash, securities and other assets segregated under federal and other regulations’ on the condensed consolidated balance sheets.

⁽²⁾Represents segregated client cash and U.S. Treasury obligations on deposit with, or pledged to, exchange clearing organizations and other FCMs. Excludes non-segregated cash, segregated securities pledged to derivatives clearing organizations with original or acquired maturities greater than 90 days, and other assets of $1,154.1 million and $836.0 million as of March 31, 2019 and 2018, respectively, included within ‘Deposits with and receivables from broker-dealers, clearing organizations, and counterparties, net’ on the condensed consolidated balance sheets.

See accompanying notes to condensed consolidated financial statements.

INTL FCStone Inc.

Condensed Consolidated ~~Statement~~Statements of Stockholders’ Equity

(Unaudited)


																Three months ended March 31, 2018
(in millions)	Common Stock		Treasury Stock			Additional Paid-in Capital		Retained Earnings		Accumulated Other Comprehensive Loss, net			Total			Common Stock		Treasury Stock			Additional Paid-in Capital		Retained Earnings		Accumulated Other Comprehensive Loss, net			Total
Balances as of September 30, 2017	$	0.2	$	(46.3	)	$	259.0	$	261.5	$	(24.5	)	$	449.9
Balances as of December 31 2017																$	0.2	$	(46.3	)	$	261.4	$	254.6	$	(26.7	)	$	443.2
Net income								39.8					39.8										22.7					22.7
Other comprehensive loss										(8.7		)	(8.7		)										(1.6		)	(1.6		)
Exercise of stock options						1.8							1.8								0.7							0.7
Share-based compensation						4.9							4.9								1.6							1.6
Balances as of June 30, 2018	$	0.2	$	(46.3	)	$	265.7	$	301.3	$	(33.2	)	$	487.7
Balances as of March 31, 2018																$	0.2	$	(46.3	)	$	263.7	$	277.3	$	(28.3	)	$	466.6



	Three months ended March 31, 2019
(in millions)	Common Stock		Treasury Stock			Additional Paid-in Capital		Retained Earnings		Accumulated Other Comprehensive Loss, net			Total
Balances as of December 31, 2018	$	0.2	$	(46.3	)	$	269.7	$	335.2	$	(32.8	)	$	526.0
Net income								23.4					23.4
Exercise of stock options						0.5							0.5
Share-based compensation						1.9							1.9
Balances as of March 31, 2019	$	0.2	$	(46.3	)	$	272.1	$	358.6	$	(32.8	)	$	551.8



	Six months ended March 31, 2018
(in millions)	Common Stock		Treasury Stock			Additional Paid-in Capital		Retained Earnings		Accumulated Other Comprehensive Loss, net			Total
Balances as of September 30 2017	$	0.2	$	(46.3	)	$	259.0	$	261.5	$	(24.5	)	$	449.9
Net income								15.8					15.8
Other comprehensive loss										(3.8		)	(3.8		)
Exercise of stock options						1.5							1.5
Share-based compensation						3.2							3.2
Balances as of March 31, 2018	$	0.2	$	(46.3	)	$	263.7	$	277.3	$	(28.3	)	$	466.6



	Six months ended March 31, 2019
(in millions)	Common Stock		Treasury Stock			Additional Paid-in Capital		Retained Earnings		Accumulated Other Comprehensive Loss, net			Total
Balances as of September 30 2018	$	0.2	$	(46.3	)	$	267.5	$	317.0	$	(33.1	)	$	505.3
Net income								41.6					41.6
Other comprehensive gain										0.3			0.3
Exercise of stock options						0.8							0.8
Share-based compensation						3.8							3.8
Balances as of March 31, 2019	$	0.2	$	(46.3	)	$	272.1	$	358.6	$	(32.8	)	$	551.8

See accompanying notes to condensed consolidated financial statements.

INTL FCStone Inc.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

Note 1 – Basis of Presentation and Consolidation and Accounting Standards Adopted

INTL FCStone Inc., a Delaware corporation, and its consolidated subsidiaries (collectively “INTL” or “the Company”), is a diversified global financial services organization providing execution, risk management and advisory services, market intelligence, and clearing services across asset classes and markets around the world. The Company’s services include comprehensive risk management advisory services for commercial ~~customers;~~clients; execution of listed futures and options on futures contracts on all major commodity exchanges; structured over-the-counter (“OTC”) products in a wide range of commodities; physical trading and hedging of precious metals and select other commodities; trading of more than 140 foreign currencies; market-making in international equities; fixed income; debt origination and asset management.

The Company provides these services to a diverse group of more than 20,000 predominantly wholesale organizations located throughout the world, including producers, processors and end-users of nearly all widely-traded physical commodities to manage their risks and enhance margins; to commercial counterparties who are end-users of the Company’s products and services; to governmental and non-governmental organizations; and to commercial banks, brokers, institutional investors and major investment banks.

Basis of Presentation and Consolidation

The accompanying unaudited condensed consolidated balance sheet as of September 30, ~~2017~~,2018, which has been derived from the audited consolidated ~~financial statements,~~balance sheet of September 30, 2018, and the unaudited interim condensed consolidated financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). Certain information and disclosures normally included in annual consolidated financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) have been condensed or omitted pursuant to those rules and regulations. The Company believes that the disclosures made are adequate to make the information presented not misleading. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation of the condensed consolidated financial statements for the interim periods presented have been reflected as required by Rule 10-01 of Regulation S-X.

Operating results for interim periods are not necessarily indicative of the results that may be expected for the full year. These interim condensed consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements and related notes contained in the Company’s Form 10-K for the fiscal year ended September 30, ~~2017~~2018 filed with the SEC.

These condensed consolidated financial statements include the accounts of INTL FCStone Inc. and all other entities in which the Company has a controlling financial interest. All material intercompany transactions and balances have been eliminated in consolidation.

The Company’s fiscal year end is September 30, and the fiscal quarters end on December 31, March 31, June 30 and September 30. Unless otherwise stated, all dates refer to fiscal years and fiscal interim periods.

The preparation of condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent liabilities as of the date of the condensed consolidated financial statements and the reported amounts of revenue and expenses during the reporting period. The most significant of these estimates and assumptions relate to fair value measurement for financial instruments and investments, revenue recognition, the provision for bad debts, valuation of inventories, valuation of goodwill and intangible assets, incomes taxes, and contingencies. Although these and other estimates and assumptions are based on the best available information, actual results could be materially different from these estimates.

In the condensed consolidated income statements, the total revenues reported combine gross revenues for the physical commodities business and net revenues for all other businesses. The subtotal ‘operating revenues’ in the condensed consolidated income statements is calculated by deducting physical commodities cost of sales from total revenues. The subtotal ‘net operating revenues’ in the condensed consolidated income statements is calculated as operating revenues less transaction-based clearing expenses, introducing broker commissions and interest expense. Transaction-based clearing expenses represent variable expenses paid to executing brokers, exchanges, clearing organizations and banks in relation to transactional volumes. Introducing broker commissions include commission paid to non-employee third parties that have introduced ~~customers~~clients to the Company. Net operating revenues represent revenues available to pay variable compensation to risk management consultants and traders and direct non-variable expenses, as well as variable and non-variable expenses of operational and administrative employees.

~~Foreign Currency Translation~~

The Company’s condensed consolidated financial statements are reported in U.S. dollars. The Company’s foreign subsidiaries maintain their records either in U.S. dollars or in certain instances the currency of the country in which they operate. The method of translating local currency financial information into U.S. dollars depends on whether the economy in which the foreign subsidiary operates has been designated as highly inflationary or not. Economies with a three-year cumulative inflation rate of more than 100% are considered highly inflationary.

Assets and liabilities of foreign subsidiaries in non-highly inflationary economies are translated into U.S. dollars using rates of exchange at the balance sheet date. Translation adjustments are recorded in other comprehensive income (loss). Revenues and expense are translated at rates of exchange in effect during the year. Transaction gains and losses are recorded in earnings.

Foreign subsidiaries that operate in highly inflationary countries use the U.S. dollar as their functional currency. Local currency monetary assets and liabilities are remeasured into U.S. dollars using rates of exchange as of each balance sheet date, with remeasurement adjustments and other transaction gains and losses recognized in earnings. Nonmonetary assets and liabilities do not fluctuate with changes in the local currency exchange rates to the dollar as the translated amounts for nonmonetary assets and liabilities at the end of the accounting period in which the economy becomes highly inflationary becomes the accounting basis for those assets and liabilities in the period of change and subsequent periods. Revenues and expenses are translated at rates of exchange in effect during the year.

The Company operates asset management and debt trading businesses in Argentina through various wholly owned subsidiaries. Net operating revenues from the Argentinean subsidiaries represented approximately 4% of the consolidated net operating revenues for the nine months ended June 30, 2018. The operating environment in Argentina continues to present business challenges, including ongoing devaluation of the Argentine peso and significant inflation. For the nine months ended June 30, 2018, the Argentine peso declined approximately 67% (from 17.3 to 28.9 pesos to the U.S. dollar). Based upon inflationary data published by the International Practices Task Force (IPTF) of the Center for Audit Quality (CAQ), the economy of Argentina became highly inflationary during the three months ended June 30, 2018.

Beginning July 1, 2018, the Company has designated Argentina’s economy as highly inflationary for accounting purposes. As a result, the Company will account for the Argentinean entities using the U.S. dollar as their functional currency beginning in the quarter ending September 30, 2018. Argentine peso-denominated monetary assets and liabilities will be remeasured at each balance sheet date to the currency exchange rate then in effect, with currency remeasurement gains and loses recognized in earnings. The translated balances for nonmonetary assets and liabilities as of June 30, 2018, will become the accounting basis for those assets in the period of change and subsequent periods.

At June 30, 2018, the Company had net monetary assets denominated in Argentine pesos of $11.2 million, including cash of $2.6 million. At June 30, 2018, the Company had net nonmonetary assets denominated in Argentine pesos of $1.1 million, including $0.1 million of goodwill.

Reclassifications

During the three and ~~nine~~six months ended ~~June 30,~~March 31, 2019, the Company reclassified certain brokerage related revenues for which the Company earns commissions on trading activity in the capacity of an agent. In performing this reclassification, the Company has made a retrospective adjustment to the condensed consolidated income statements for the three and six months ended March 31, 2018. For the three and six months ended March 31, 2018, brokerage related revenues of $9.2 million and $17.9 million, respectively, were reclassified from ‘trading gains, net’ to ‘commissions and clearing fees’. Additionally, the Company has renamed the line item ‘trading gains, net’ to ‘principal gains, net’ on the condensed consolidated income statements in order to reflect the fact that these revenue streams are earned from trading financial instruments in the capacity of a principal and in order to properly segregate revenues earned from contracts with clients in connection with the adoption of the new revenue standard as discussed below.

Accounting Standards Adopted

On October 1, 2018, the Company ~~separately classified non-trading technology~~adopted Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 606, Revenue from Contracts with Customers (“Topic 606”) using the modified retrospective transition method applied to those contracts which were not completed as of October 1, 2018. Results for reporting periods beginning after October 1, 2018, are presented under Topic 606, and ~~support costs~~amounts prior to October 1, 2018 are not adjusted and continue to be reported in accordance with historical accounting standard, FASB ASC 605, Revenue Recognition (“Topic 605”). The adoption of Topic 606 had no impact to retained earnings as of October 1, 2018, or to revenue for the three months ended December 31, 2018. The Company’s accounting for revenues within the scope of Topic 606 are materially consistent with those accounting principles and practices applied to accounting for revenues under Topic 605. The new revenue recognition model does not apply to revenues associated with financial instruments or contracts, including derivatives and interest income. For further information refer to Note 2.

In August 2016, the FASB issued ASU 2016-15, Statements of Cash Flows (“Topic 230”): Classification of Certain Cash Receipts and Cash Payments, which clarifies how companies present and classify certain cash receipts and cash payments in the statement of cash flows. The Company adopted the provisions of this guidance on October 1, 2018 and the adoption had no impact on its condensed consolidated financial statements.

On October 1, 2018, the Company adopted FASB Accounting Standards Update (“ASU”) 2016-18, Statements of Cash Flows (“Topic 230”): Classification and Presentation of Restricted Cash in the Statements of Cash Flows, using the retrospective transition method. In accordance with the provisions of ASU 2016-18, the Company changed its condensed consolidated statements of cash flows presentation convention to explain the changes in cash and cash equivalents, as well as cash and cash equivalents segregated for regulatory purposes. U.S. Treasury obligations with original or acquired maturities of 90 days or less held with third-party banks or pledged with exchange-clearing organizations representing investments of segregated client funds, or which are held for particular clients in lieu of cash margin, are included in segregated cash equivalents. Purchases, sales, as well as client pledges and redemptions in lieu of cash margin, of U.S. Treasury obligations with original or acquired maturities of greater than 90 days representing investments of segregated client funds are presented as operating uses and sources of cash, respectively, within the operating section of the condensed consolidated statements of cash flows.

In May 2017, the FASB issued ASU No. 2017- 09, Scope of Modification Accounting (“Topic 718”), which amends the scope of modification accounting for share- based payment arrangements. ASU 2017- 09 provides guidance on the types of changes to the terms or conditions of share- based payment awards to which an entity would be required to apply modification accounting under ASC 718. Specifically, an entity would not apply modification accounting if the fair value, vesting conditions, and classification of the awards are the same immediately before and after the modification. The Company adopted ASU 2017- 09 on October 1, 2018. The adoption of the ASU had no impact on the Company's condensed consolidated financial statements and related disclosures.

Note 2 – Revenue from Contracts with Clients

Beginning on October 1, 2018, the Company accounts for revenue earned from contracts with clients for services such as the execution, clearing, brokering, and custody of futures and options on futures contracts, OTC derivatives, and securities, investment management, and underwriting services under Topic 606. As such, revenues for these services are recognized when the performance obligations related to the underlying transaction are completed.

Revenues are recognized when control of the promised goods or services are transferred to clients, in an amount that ~~were previously included~~reflects the consideration the Company expects to be entitled to in exchange for those goods or services. Revenues are analyzed to determine whether the Company is the principal (i.e. reports revenue on a gross basis) or agent (i.e., reports revenues on a net basis) in the contract. Principal or agent designations depend primarily on the control an entity has over the good or service before control is transferred to a client. The indicators of which party exercises control include primary responsibility over performance obligations, inventory risk before the good or service is transferred, and discretion in establishing the price.

The new revenue recognition model does not apply to revenues associated with dealing, or market-making, activities in financial instruments or contracts in the capacity of a principal, including derivative sales contracts which result in physical settlement and interest income.

The Company’s revenues from contracts with clients subject to Topic 606 represent approximately 1.4% and 1.9% of the Company’s total revenues for the three months ended March 31, 2019 and 2018, respectively, and approximately 1.6% of the Company’s total revenues for the six months ended March 31, 2019 and 2018. The Company’ revenues from contracts with clients subject to Topic 606 represent approximately 38.4% and 48.0% of the Company’s operating revenues for the three months ended March 31, 2019 and 2018, respectively, and approximately 41.6% and 48.2% of the Company’s operating revenues for the six months ended March 31, 2019 and 2018, respectively. This includes all of the Company’s commission and clearing fees and consulting, management, and account fees revenues. Revenues within ~~‘Other’~~the scope of Topic 606 are presented within ‘Commission and clearing fees’ and ‘Consulting, management, and account fees’ on the condensed consolidated income statements. Additionally, during the three and nine months ended June 30, 2018, the Company separately classified communications related expenses separately from trading systems and market information related costs. In performing these reclassifications, the Company has made immaterial, retrospective adjustments to conform to the current period presentation. For the three and nine months ended June 30, 2017, ‘Other’ expenses included $3.2 million and $8.9 million, respectively, of expensesRevenues that are ~~now included~~not within ~~‘Non-trading technology~~the scope of Topic 606 are presented within ‘Sales of physical commodities’, ‘Principal gains, net’, and support’ on the condensed consolidated income statements. For the three and nine months ended June 30, 2017, ‘Trading systems and market information’ included $1.5 million and $3.9 million, respectively, of expenses that are now included within ‘Communications’‘Interest income’ on the condensed consolidated income statements.

~~Accounting Standards Adopted~~

In March 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update No. 2016-09, “Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting” (“ASU 2016-09”), which simplifies several aspectsThe following table represents a disaggregation of the ~~accounting~~Company’s total revenues separated between revenues from contracts with clients and other sources of revenue for ~~share-based payment transactions. Under ASU 2016-09, excess tax benefits~~the three and ~~tax deficiencies~~six months ended March 31, 2019 and 2018 (in millions):



	Three Months Ended March 31,				Six Months Ended March 31,
	2019		2018		2019		2018
Revenues from contracts with clients:
Commission and clearing fees:
Sales-based:
Exchange-traded futures and options	$	31.2	$	44.0	$	70.3	$	78.6
OTC derivative brokerage	7.3		8.3		16.2		15.8
Equities and fixed income	3.6		2.8		6.8		5.6
Mutual funds	1.9		2.1		4.5		4.1
Insurance and annuity products	1.5		1.5		3.0		3.0
Other	0.5		—		0.7		0.6
Total sales-based commission	46.0		58.7		101.5		107.7
Trailing:
Mutual funds	3.0		3.3		6.2		6.6
Insurance and annuity products	3.4		3.7		7.1		7.3
Total trailing commission	6.4		7.0		13.3		13.9

Clearing fees	26.8		34.5		59.4		59.5
Trade conversion fees	3.3		2.0		4.9		3.8
Other	2.6		4.2		5.5		8.0
Total commission and clearing fees:	85.1		106.4		184.6		192.9

Consulting, management, and account fees:
Underwriting fees	0.2		0.7		0.5		1.3
Asset management fees	6.0		6.4		12.2		12.5
Advisory and consulting fees	4.7		4.8		9.7		9.4
Sweep program fees	4.1		2.7		7.9		4.9
Customer account fees	2.5		2.9		5.2		5.7
Other	1.6		0.9		2.7		1.2
Total consulting, management, and account fees	19.1		18.4		38.2		35.0
Total revenues from contracts with clients	$	104.2	$	124.8	$	222.8	$	227.9

Method of revenue recognition:
Point-in-time	$	83.0	$	103.9	$	179.7	$	187.2
Time elapsed	21.2		20.9		43.1		40.7
Total revenues from contracts with clients	104.2		124.8		222.8		227.9
Other sources of revenues
Precious metals trading	6,660.9		6,031.6		12,616.4		13,563.5
Agricultural and energy merchandising and origination	268.6		224.2		608.9		406.7
Principal gains, net	110.3		98.5		203.1		175.6
Interest income	48.2		27.9		93.2		51.9
Total revenues	$	7,192.2	$	6,507.0	$	13,744.4	$	14,425.6

Primary geographic region:
United States	$	456.6	$	404.1	$	983.6	$	728.0
Europe	53.8		47.8		107.1		93.0
South America	12.4		16.7		23.9		31.7
Middle East and Asia	6,667.3		6,037.4		12,625.9		13,571.0
Other	2.1		1.0		3.9		1.9
Total revenues	$	7,192.2	$	6,507.0	$	13,744.4	$	14,425.6

The substantial majority of the Company’s performance obligations for revenues from contracts with clients are satisfied at a point in time and are typically collected from clients by debiting their accounts with the Company.

Commission and clearing fees revenue is primarily related to the Commercial Hedging and Clearing and Execution Services reportable segments. Consulting, management, and accounts fees are primarily related to the Commercial Hedging, Clearing and Execution Services, and Securities reportable segments. Principal gains, net is primarily related to the Commercial Hedging, Global Payments, and Securities reportable segments. Interest income is primarily related to the Commercial Hedging, Securities, and Clearing and Execution Services reportable segments. Precious metals trading and agricultural and energy merchandising and origination revenues are primarily related to the Physical Commodities reportable segment.

Commission and Clearing Fees

Commission revenue represents sales and brokerage commissions generated by internal brokers, introducing broker-dealers, or registered investment advisors of introducing-broker dealers for their clients’ trading activity in futures, options on futures, OTC derivatives, fixed income securities, equity securities, mutual funds, and annuities. The Company views the selling, distribution, and marketing, or any combination thereof, of mutual funds and insurance and annuity products to clients on the Company’s registered investment advisor (“RIA”) platform as a single performance obligation to the product sponsors.

The Company is the principal for commission revenue, as it is responsible for the execution of the clients’ purchases and sales, and maintains relationships with product sponsors for trailing commission. Introducing broker dealers and registered investment advisors assist the Company in performing its obligations. Accordingly, total commission revenues are reported on a gross basis.

The Company primarily generates commission revenue on exchange-traded derivatives, OTC derivatives, and securities. Exchange-traded and OTC derivative commissions are recognized at a point in time on the trade date when the client, either directly or through the use of an internal broker or introducing broker, requests the clearance and execution of a trade. Securities commissions are either sale-based commission that are recognized at a point in time on the trade date or trailing commission that are recognized over time as earned. Sales-based securities commission is for a flat fee per security transaction or in certain instances are based on a percentage of an investment product’s current market value at the time of purchase. Trailing commission revenue is generally based on a percentage of the current market value of clients’ investment holdings in trail-eligible assets, and is recognized over the period during which services, such as on-going support, are performed. As trailing commission revenue is based on the market value of clients’ investment holdings in trail-eligible assets, this variable consideration is constrained until the market value of trail-eligible assets is determinable.

Clearing fees generally represent transactional based fees charged by the various exchanges and clearing organizations for which the Company or one of its clearing brokers is a member for the privilege of executing and clearing trades through them. Clearing fees are generally passed through to the clients’ accounts and are reported gross as the Company maintains control over the clearing and execution services provided, maintains relationships with the exchanges or clearing brokers, and has ultimate discretion in whether the fees are passed through to the clients and the rates at which they are passed through. As clearing fees are transactional based revenues they are recognized at a point in time on the trade date along with the related commission revenue when the client requests the clearance and execution of a trade.

Trade Conversion Revenue

Trade conversion revenue includes fees earned from converting foreign ordinary equities into an American Depository Receipt (“ADR”) or Global Depository Receipt (“GDR”) and fees earned from converting an ADR or GDR into foreign ordinary equities on behalf of clients. Trade conversion revenue is reported on a trade date basis.

Underwriting Fees

Revenues from investment banking consists of revenues earned from underwriting fixed income ~~tax expense or benefit~~securities, primarily municipal and asset-backed securities, and are recognized in revenues upon completion of the underlying transaction, which is generally the trade date, based upon the terms of the assignment as the performance obligation is to successfully broker a specific transaction.

Asset Management Fees

The Company earns asset management fees on Company sponsored and managed mutual funds and on the advisory accounts of independent registered investment advisors on the Company’s platform. The Company provides ongoing investment advice and acts as a custodian, providing brokerage and execution services on transactions, and performs administrative services for these accounts. This series of performance obligations transfers control of the services to the client over time as the services are performed. This revenue is recognized ratably over time to match the continued delivery of the performance obligations to the client over the life of the contract. The asset management revenue generated is based on a percentage of the market value of the eligible assets in the clients’ accounts. As such, the consideration for this revenue is variable and this variable consideration is constrained until the market value of eligible assets in the clients’ accounts is determinable.

Advisory and Consulting Fees

Advisory and consulting fees are primarily related to risk management consulting fees which are billed and recognized as revenue on a monthly basis when risk management services are provided. Such agreements are generally for one year periods, but are generally cancelable by either party upon providing thirty days’ written notice to the other party and the amounts are not variable based on client trading activities. This revenue is generally recognized ratably over time to match the continued delivery of the performance obligation to the client over the life of the contract.

Sweep Program Fees

The Company earns fees generated in lieu of interest income from a multi-bank sweep program with unaffiliated banks and money market funds. Pursuant to contractual arrangements with clients and their introducing-brokers, available cash balances in client accounts are swept into either Federal Deposit Insurance Corporation (“FDIC”) insured cash accounts at unaffiliated banks or unaffiliated money market funds for which the Company earns a portion of the interest income generated by the client balances for administration and recordkeeping. The fees generated by the Company’s multi-bank sweep program are reported net of the balances remitted to the introducing-brokers and the clients of introducing-brokers. These fees are paid and recognized over time to match the continued delivery of the administration and recordkeeping performance obligations to the life of the contract. The fees earned under this program are generally based upon the type of sweep account, prevailing interest rates, and the amount of client balances invested.

Client Accounts Fees

Client accounts fees represent fees earned for custodial, recordkeeping, and administrative functions performed for the securities clearing accounts of clients. These include statement ~~instead~~delivery fees, account transfer fees, safekeeping fees, errors and omission insurance fees, platform fees, and other fees. Client account fees that are transactional based, such as account transfer fees, are recognized at a point in time when the related performance obligation is satisfied. Client account fees that are related to ongoing services, such as statement delivery fees and errors and omission insurance fees, are recognized over time. Client account fees that relate to ongoing services are typically billed to clients’ accounts on a monthly or quarterly basis.

Physical Precious Metals Trading

The Company principally generates revenue from trading physical precious metals on an OTC basis. Revenues from the sale of ~~additional paid~~physical precious metals are recorded on a trade date basis and generally settle on an unallocated basis. Substantially all of the Company’s sales of precious metals are conducted using sales contracts that meet the definition of derivative instruments in ~~capital. ASU 2016-09 also provides entities~~accordance with ASC 815 - Derivatives and Hedging (“Topic 815”). The contracts underlying the Company’s commitment to deliver precious metals are referred to as fixed price forward commodity contracts because the price of the commodity is fixed at the time the order is placed. Although the contracts typically are executed on a spot basis and settle on unallocated account, the client has the option to ~~elect~~request delivery of the precious metals, the option to net settle out of the position by executing an ~~accounting policy~~offsetting trade, or the option to ~~estimate forfeitures~~roll the transaction to a subsequent maturity date. Thus, the sales contracts contain embedded option derivatives that would be subject to the guidance in Topic 815. As the contracts are subject to the guidance in Topic 815, the fixed price derivative sales contracts are outside the scope of ~~share-based awards over~~Topic 606. The Company recognizes revenue when control of the ~~service period~~inventory is transferred within the meaning of Topic 606.

Physical Agricultural Commodity Merchandising and Origination

The Company principally generates revenue from merchandising and originating physical agricultural and energy commodities from forward firm sales commitments accounted in accordance with Topic 815. The fixed and provisionally-priced derivative sales contracts that result in physical delivery are outside the scope of Topic 606. The Company recognizes revenue when control of the inventory is transferred within the meaning of Topic 606.

Principal Gains, Net

Principal gains, net includes revenues on financial transactions or ~~account~~contracts for ~~forfeitures when they occur. Under ASU 2016-09, previously unrecognized excess tax benefits should be~~which the Company acts as principal that is reported on a net basis and is primarily outside the scope of ASC 606. Principal gains, net includes margins generated from OTC derivative trades, equities, fixed income, and foreign exchange executed with clients and other counterparties and are recognized ~~using~~on a ~~modified retrospective transition. In addition, amendments requiring recognition~~trade-date basis. Principal gains, net, also includes realized and unrealized gains and losses derived principally from market making activities in OTC derivatives, equities, fixed income, and foreign exchange. Net dealer inventory and investment gains are recognized on a trade-date basis and include realized gains or losses and changes in unrealized gains or losses on investments at fair value. Principal gains, net also includes dividend income on long equity positions and dividend expense on short equity positions, which are recognized on the ex-dividend date.

Interest Income

Interest income is generated from client funds deposited with the Company to satisfy margin requirements which is held by third-party banks or on deposit with or pledged to exchange-clearing organizations or other FCMs. Interest income is also generated from the investment of ~~excess tax benefits~~client funds in allowable securities, primarily U.S. Treasury obligations. Interest income is also generated from trading fixed income securities that the Company holds in its market-making businesses. Interest income also includes interest generated from collateralized transactions, including securities borrowed and ~~tax deficiencies~~securities purchased under agreements to resell, and from extending margin loans to clients. Interest income is recognized on an accrual basis and is not within the scope of Topic 606.

Remaining Performance Obligations

Remaining performance obligations are services that the firm has committed to perform in the ~~income statement,~~future in connection with its contracts with clients. The Company’s remaining performance obligations are generally related to its risk management consulting and asset management contracts with clients. Revenues associated with remaining performance obligations related to these contracts with clients are not material to the overall consolidated results of the Company. For the Company’s asset management activities, where fees are calculated based on a percentage of the market value of eligible assets in client’s accounts, future revenue associated with remaining performance obligations cannot be determined as ~~well as changes~~such fees are subject to fluctuations in the ~~computation~~market value of ~~weighted-average diluted shares outstanding, should be applied prospectively. ASU 2016-09 is effective for and was adopted by the Company~~eligible assets in ~~the first quarter of 2018 and the impact of the adoption resulted in the following:~~clients’ accounts.

During the nine months ended June 30, 2018, the Company recognized excess tax benefits from share-based compensation of $0.4 million within income tax expense on the condensed consolidated income statement and within net income on the condensed consolidated cash flow statement. Prior to adoption, the tax effect of share-based awards would have been recognized in additional paid-in-capital on the condensed consolidated balance sheets and separately stated in the financing activities in the condensed consolidated cash flow statements. The Company has elected to adopt this guidance prospectively.Practical Expedients

The Company has elected to account for forfeitures of share-based awards as they occur. The Company elected to account for forfeitures as they occur using a modified retrospective transition method. The adoption of this guidance did not have a material impact on the condensed consolidated financial statements.

~~The excess tax benefits from the assumed proceeds available to repurchase shares were excluded in the computation of diluted earnings per share~~applied Topic 606’s practical expedient that permits for the ~~three~~non-disclosure of the value of performance obligations for (i) contracts with an original expected length or one year or less and ~~nine months ended June 30, 2018.~~ (ii) contracts for which the Company recognizes revenue at the amount to which is has the right to invoice for services performed.

The Company has ~~elected~~also applied Topic 606’s practical expedient that allows for no adjustment to ~~adopt this guidance prospectively.~~

~~For~~consideration due to a significant financing component if the ~~nine months ended June 30, 2018,~~expectation at contract inception is such that the ~~Company has classified as a financing activity in~~period between payment by the ~~condensed consolidated cash flow statement $0.8 million~~client and the transfer of ~~cash paid~~the promised goods or services to ~~taxing authorities for restricted stock shares withheld to satisfy statutory income tax withholding obligations. The retrospective application of this guidance had no impact on~~ the ~~condensed consolidated cash flow statement for the nine months ended June 30, 2017.~~

In July 2015, the FASB issued ASU No. 2015-11, “Simplifying the Measurement of Inventory (Topic 330).” Under ASU 2015-11, inventory that is measured using the first-in, first-out (FIFO), specific identification,client will be one year or average cost methods should be measured at the lower of cost or net realizable value. This ASU does not impact inventory measurement under the last-in, first-out (LIFO) or retail inventory methods. The Company adopted this ASU prospectively in the first quarter of 2018. The adoption of this ASU did not have a material impact on the condensed consolidated financial statements.less.

Note 23 – Earnings per Share

The Company presents basic and diluted earnings per share (“EPS”) using the two-class method which requires all outstanding unvested share-based payment awards that contain rights to non-forfeitable dividends and therefore participate in undistributed earnings with common stockholders be included in computing earnings per share. Under the two-class method, net income is reduced by the amount of dividends declared in the period for each class of common stock and participating security. The remaining undistributed earnings are then allocated to common stock and participating securities, based on their respective rights to receive dividends. Restricted stock awards granted to certain employees and directors contain non-forfeitable rights to dividends at the same rate as common stock, and are considered participating securities. Basic EPS has been computed by dividing net income by the weighted-average number of common shares outstanding.

The following is a reconciliation of the numerator and denominator of the diluted earnings per share computations for the periods presented below.


	Three Months Ended June 30,						Nine Months Ended June 30,						Three Months Ended March 31,						Six Months Ended March 31,
(in millions, except share amounts)	2018			2017			2018			2017			2019			2018			2019			2018
Numerator:
Net income	$	24.0		$	12.7		$	39.8		$	30.0		$	23.4		$	22.7		$	41.6		$	15.8
Less: Allocation to participating securities	(0.3		)	(0.3		)	(0.6		)	(0.6		)	(0.4		)	(0.3		)	(0.7		)	(0.3		)
Net income allocated to common stockholders	$	23.7		$	12.4		$	39.2		$	29.4		$	23.0		$	22.4		$	40.9		$	15.5
Denominator:
Weighted average number of:
Common shares outstanding	18,597,165			18,447,053			18,524,846			18,365,939			18,753,490			18,559,849			18,706,104			18,502,795
Dilutive potential common shares outstanding:
Share-based awards	379,733			255,075			351,413			293,199			251,303			299,484			293,785			333,418
Diluted weighted-average common shares	18,976,898			18,702,128			18,876,259			18,659,138			19,004,793			18,859,333			18,999,889			18,836,213

The dilutive effect of share-based awards is reflected in diluted earnings per share by application of the treasury stock method, which includes consideration of unamortized share-based compensation expense required under the Compensation – Stock Compensation Topic of the ASC.

Options to purchase ~~76,587~~1,032,077 and ~~210,543~~173,992 shares of common stock for the three months ended ~~June 30,~~March 31, 2019 and 2018, ~~and 2017,~~ respectively, and options to purchase ~~147,640~~704,863 and ~~242,778~~136,440 shares of common stock for the ~~nine~~six months ended ~~June 30,~~March 31, 2019 and 2018, ~~and 2017,~~ respectively, were excluded from the calculation of diluted earnings per share as they would have been anti-dilutive.

Note 34 – Assets and Liabilities, at Fair Value

Fair value is defined by U.S. GAAP as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between willing market participants on the measurement date.

Fair value is a market-based measure considered from the perspective of a market participant rather than an entity-specific measure. Therefore, even when market assumptions are not readily available, the Company is required to develop a set of assumptions that reflect those that market participants would use in pricing the asset or liability at the measurement date. The Company uses prices and inputs that are current as of the measurement date, including periods of market dislocation. In periods of market dislocation, the observability of prices and inputs may be reduced for many ~~assets and liabilities.~~securities. This condition could cause a security to be reclassified to a lower level within the fair value hierarchy.

The Company has designed independent price verification controls and periodically performs such controls to ensure the reasonableness of such values.

In accordance with FASB ASC 820, Fair Value Measurement, the Company groups its assets and liabilities measured at fair value in three levels based on the markets in which the assets and liabilities are traded and the reliability of the assumptions used to determine fair value. These levels are:

Level 1 - Valuation is based upon unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities. Level 1 consists of financial assets and liabilities whose fair values are estimated using quoted market prices.

Level 2 - Valuation is based upon quoted prices for identical or similar assets or liabilities in markets that are less active, that is, markets in which there are few transactions for the asset or liability that are observable for substantially the full term. Included in Level 2 are those financial assets and liabilities for which fair values are estimated using models or other valuation methodologies. These models are primarily industry-standard models that consider various observable inputs, including time value, yield curve, volatility factors, observable current market and contractual prices for the underlying financial instruments, as well as other relevant economic measures.

Level 3 - Valuation is based on prices or valuation techniques that require an input that is both significant to the fair value measurement and unobservable (i.e., supported by little or no market activity). Level 3 comprises financial assets and liabilities whose fair value is estimated based on internally developed models or methodologies utilizing significant inputs that are not readily observable from objective sources. The Company had no assets or liabilities classified within Level 3 of the fair value hierarchy as of March 31, 2019 and September 30, 2018.

Financial and nonfinancial assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). A market is

active if there are sufficient transactions on an ongoing basis to provide current pricing information for the asset or liability, pricing information is released publicly, and price quotations do not vary substantially either over time or among market participants. Observable inputs reflect the assumptions market participants would use in pricing the asset or liability developed based on market data obtained from sources independent of the reporting entity.

The guidance requires the Company to consider counterparty credit risk of all parties of outstanding derivative instruments that would be considered by a market participant in the transfer or settlement of such contracts (exit price). The Company’s exposure to credit risk on derivative financial instruments principally relates to the portfolio of OTC derivative contracts as all exchange-traded contracts held can be settled on an active market with a credit guarantee from the respective exchange. The Company requires ~~most counterparties~~each counterparty to deposit margin collateral for all OTC instruments and is also required to deposit margin collateral with ~~counterparties, which mitigates~~counterparties. The Company has assessed the ~~impact~~nature of these deposits and used its discretion to adjust each based on the underlying credit considerations for the counterparty and determined that the collateral deposits minimize the exposure to counterparty credit risk in the evaluation of the fair value of OTC ~~derivative contracts.~~instruments as determined by a market participant.

Fair value of financial and nonfinancial assets and liabilities that are carried on the Condensed Consolidated Balance Sheets at fair value on a recurring basis

Cash and cash equivalents reported at fair value on a recurring basis includes certificates of deposit and demand deposits, which are stated at cost plus accrued interest, which approximates fair value.

Cash, securities and other assets segregated under federal and other regulations reported at fair value on a recurring basis include the value of pledged investments, primarily U.S. Treasury obligations and commodities warehouse receipts.

Deposits with and receivables from broker-dealers, clearing organizations and counterparties and payable to ~~customers~~clients and broker-dealers, clearing organizations and counterparties include the value of pledged investments, primarily U.S. Treasury obligations and foreign government obligations. These balances also include the fair value of exchange-traded options on futures and ~~exchange-cleared~~ OTC forwards, swaps, and ~~options determined by quoted prices on the applicable exchange.~~

options.

Financial instruments owned and sold, not yet purchased ~~reported at~~include the fair value ~~on a recurring basis include the value~~ of equity securities, which includes common, ~~and~~ preferred, ~~stock, American Depository Receipts (“ADRs”),~~ and ~~Global Depository Receipts (“GDRs”), exchangeable~~ foreign ordinary ~~equities,~~shares, ADRs, GDRs, and ~~GDRs,~~exchange-traded funds (“ETFs”), corporate and municipal bonds, U.S. Treasury obligations, U.S. government agency obligations, foreign government obligations, agency mortgage-backed obligations, asset-backed obligations, OTC derivative financial instruments, ~~commodities leases,~~ commodities warehouse receipts, exchange firm common stock, and mutual funds and investments in managed funds.

~~Physical~~

Cash equivalents, securities, commodities warehouse receipts, physical commodities inventory, ~~recorded~~and derivative financial instruments are carried at fair value, on a recurring basis, ~~includes precious metals that~~and are ~~a part of~~classified and disclosed into three levels in the ~~trading activities of a regulated broker-dealer subsidiary and is recorded at~~ fair value using spot prices. Physical commodities inventory also includes agricultural commodities that are a part of the trading activities of a non-broker dealer subsidiary and are also recorded at net realizable value using spot prices. Precious metals inventory held by subsidiaries that are not broker-dealers are valued at fair value on a non-recurring basis. hierarchy.

Except as disclosed in Note 6,7, the Company did not have any fair value adjustments for assets or liabilities measured at fair value on a non-recurring basis as of ~~June 30, 2018~~March 31, 2019 and September 30, ~~2017.~~2018.

The following section describes the valuation methodologies used by the Company to measure classes of financial ~~instruments~~and non-financial assets and liabilities at fair value and specifies the level within the fair value hierarchy where various financial ~~instruments~~and non-financial assets and liabilities are classified.

The Company uses quoted prices in active markets, where available, and classifies such instruments within Level 1 of the fair value hierarchy. Examples include U.S. Treasury obligations, foreign government obligations, commodities warehouse receipts, ~~some common and preferred stock, ADRs, and GDRs, some exchangeable foreign ordinary equities, ADRs, and GDRs, some corporate and municipal obligations,~~certain equity securities traded in active markets, physical precious metals held by a regulated broker-dealer subsidiary, exchange firm common stock, mutual funds and investments in managed funds, as well as exchange traded options on futures contracts.

When instruments are traded in secondary markets and observable prices are not available for substantially the full term, the Company generally relies on internal valuation techniques ~~that use observable inputs~~ or prices obtained from third-party pricing services or brokers or a combination thereof, and accordingly, classified these instruments as Level 2. Examples include corporate and municipal bonds, U.S. government agency obligations, agency-mortgage backed obligations, asset-backed obligations, ~~foreign government obligations, some common and preferred stock, ADRs, and GDRs,~~ certain ~~exchangeable foreign ordinary equities, ADRs, and GDRs, OTC commodity and foreign exchange forwards, swaps, and options, physical agricultural commodity inventory,~~equity securities traded in less active markets, and OTC ~~firm~~derivative contracts, which include purchase and sale commitments related to the Company’s agricultural and energy commodities.

Certain derivatives without a quoted price in an active market and derivatives executed OTC are valued using internal valuation techniques, including pricing models which utilize significant inputs observable to market participants. The valuation techniques and inputs depend on the type of derivative and the nature of the underlying instrument. The key inputs depend upon the type of derivative and the nature of the underlying instrument and include interest yield curves, foreign exchange rates, commodity prices, volatilities and correlation. These derivative instruments are included within Level 2 of the fair value hierarchy.

Physical commodities inventory includes precious metals that are a part of the trading activities of a regulated broker-dealer subsidiary and is recorded at net realizable value using exchange-quoted prices. Physical commodities inventory also includes agricultural commodities that are a part of the trading activities of a non-broker dealer subsidiary and are also recorded at net realizable value using exchange-quoted prices. The fair value of precious metals physical commodities inventory is based upon unadjusted exchange-quoted prices and is, therefore, classified within Level 1 of the fair value hierarchy. The fair value of agricultural physical commodities inventory and the related OTC firm sale and purchase commitments are generally based upon exchange-quoted prices, adjusted for basis or differences in local markets, broker or dealer quotations or market transactions in either listed or OTC markets. Exchange-quoted prices are adjusted for location and quality because the exchange-quoted prices for agricultural and energy related products represent contracts that have standardized terms for commodity, quantity, future delivery period, delivery location, and commodity quality or grade. The basis or local market adjustments are observable inputs or have an insignificant impact on the measurement of fair value and, therefore, the agricultural physical commodities inventory as well as the related OTC forward firm sale and purchase commitments have been included within Level 2 of the fair value hierarchy.

With the exception of certain derivative instruments, financial instruments owned and sold are primarily valued using ~~third party~~third-party pricing ~~sources. Third party~~vendors. Third-party pricing vendors compile prices from various sources and often apply matrix pricing for similar securities when ~~no prices~~market-observable transactions for the instruments are ~~observable.~~not observable for substantially the full term. The Company reviews the pricing methodologies ~~provided~~used by ~~the various~~third-party pricing vendors in order to ~~determine if observable market information is being used, versus unobservable inputs.~~evaluate the fair value hierarchy classification of vendor-priced financial instruments and the accuracy of vendor pricing, which typically involves the comparison of primary vendor prices to internal trader prices or secondary vendor prices. When evaluating the propriety of ~~an internal trader price compared with vendor~~vendor-priced financial instruments using secondary prices, considerations include the range and quality of vendor ~~prices. Trader or broker~~ prices, ~~are used to ensure the reasonableness~~level of ~~a vendor price; however valuing financial~~observable transactions for identical and similar instruments, ~~involves~~and judgments ~~acquired from~~based upon knowledge of a particular ~~market.~~market and asset class. If ~~a trader asserts that a~~the primary vendor ~~or market~~ price isdoes not ~~reflective of market~~represent fair value, justification for using ~~the trader~~a secondary price, including ~~recent sales activity where possible, must be provided~~source data used to make the determination, is subject to review and ~~approved~~approval by ~~the appropriate levels of management.~~authorized personnel prior to using a secondary price. Financial instruments owned and sold that are valued using third party pricing sources are included within either Level 1 or Level 2 of the fair value hierarchy based upon the observability of the inputs used and the level of activity in the market.

Level 3 comprises financial assets and liabilities whose fair value is estimated based on internally developed models or methodologies utilizing significant inputs that are not readily observable from objective sources. Included in Level 3 are some common stock and ADRs, some corporate and municipal obligations, and contingent liabilities. Level 3 assets and liabilities are valued using an income approach based upon management developed discounted cash flow projections, which are an unobservable input.

The fair value estimates presented herein are based on pertinent information available to management as of ~~June 30, 2018~~March 31, 2019 and September 30, ~~2017.~~2018. Although management is not aware of any factors that would significantly affect the estimated fair value amounts, such amounts have not been comprehensively revalued for purposes of these ~~condensed consolidated~~ financial statements since ~~those respective dates~~that date and current estimates of fair value may differ significantly from the amounts presented herein.

The following tables set forth the Company’s financial and nonfinancial assets and liabilities accounted for at fair value, on a recurring basis, as of ~~June 30, 2018~~March 31, 2019 by level in the fair value hierarchy.


	June 30, 2018											March 31, 2019
(in millions)	Level 1		Level 2		Level 3		Netting and Collateral (1)			Total		Level 1		Level 2		Level 3		Netting and Collateral (1)			Total
Assets:
Unrestricted cash equivalents - certificate of deposits	$	3.8	$	—	$	—	$	—		$	3.8
Unrestricted cash equivalents - certificates of deposit												$	8.3	$	—	$	—	$	—		$	8.3
Commodities warehouse receipts	74.9		—		—		—			74.9		36.1		—		—		—			36.1
U.S. Treasury obligations	600.5		—		—		—			600.5		199.7		—		—		—			199.7
Cash, securities and other assets segregated under federal and other regulations	675.4		—		—		—			675.4
Securities and other assets segregated under federal and other regulations												235.8		—		—		—			235.8
U.S. Treasury obligations	666.7		—		—		—			666.7		429.4		—		—		—			429.4
"To be announced" (TBA) and forward settling securities	—		4.4		—		(0.1		)	4.3		—		12.1		—		(0.9		)	11.2
Foreign government obligations	—		5.5		—		—			5.5		9.9		—		—		—			9.9
Derivatives	6,131.7		24.2		—		(6,116.0		)	39.9		3,553.9		90.0		—		(3,671.7		)	(27.8		)
Deposits with and receivables from broker-dealers, clearing organization and counterparties	6,798.4		34.1		—		(6,116.1		)	716.4
Common and preferred stock, ADRs, and GDRs	33.2		2.9		—		—			36.1
Exchangeable foreign ordinary equities, ADRs, and GDRs	29.7		1.4		—		—			31.1
Deposits with and receivables from broker-dealers, clearing organizations and counterparties												3,993.2		102.1		—		(3,672.6		)	422.7
Equity securities												82.9		3.7		—		—			86.6
Corporate and municipal bonds	64.1		0.2		—		—			64.3		—		94.8		—		—			94.8
U.S. Treasury obligations	99.7		—		—		—			99.7		330.2		—		—		—			330.2
U.S. government agency obligations	—		352.8		—		—			352.8		—		755.8		—		—			755.8
Foreign government obligations	—		8.5		—		—			8.5		5.5		—		—		—			5.5
Agency mortgage-backed obligations	—		1,036.2		—		—			1,036.2		—		1,025.8		—		—			1,025.8
Asset-backed obligations	—		47.4		—		—			47.4		—		36.7		—		—			36.7
Derivatives	0.7		1,473.7		—		(1,169.4		)	305.0		1.2		387.0		—		(184.5		)	203.7
Commodities leases	—		77.9		—		(70.6		)	7.3		—		13.7		—		—			13.7
Commodities warehouse receipts	0.1		—		—		—			0.1		23.0		—		—		—			23.0
Exchange firm common stock	10.0		—		—		—			10.0		9.9		—		—		—			9.9
Mutual funds and other	4.9		—		—		—			4.9		11.0		—		—		—			11.0
Financial instruments owned	242.4		3,001.0		—		(1,240.0		)	2,003.4		463.7		2,317.5		—		(184.5		)	2,596.7
Physical commodities inventory, net	8.9		102.2		—		—			111.1
Physical commodities inventory												39.6		163.3		—		—			202.9
Total assets at fair value	$	7,728.9	$	3,137.3	$	—	$	(7,356.1	)	$	3,510.1	$	4,740.6	$	2,582.9	$	—	$	(3,857.1	)	$	3,466.4
Liabilities:
TBA and forward settling securities	—		7.2		—		(0.1		)	7.1		—		16.7		—		(0.9		)	15.8
Derivatives	6,175.9		3.4		—		(6,179.3		)	—		3,502.9		71.0		—		(3,573.9		)	—
Payable to broker-dealers, clearing organizations and counterparties	6,175.9		10.6		—		(6,179.4		)	7.1		3,502.9		87.7		—		(3,574.8		)	15.8
Common and preferred stock, ADRs, and GDRs	39.3		8.8		—		—			48.1
Exchangeable foreign ordinary equities, ADRs, and GDRs	31.2		—		—		—			31.2
Equity securities												68.6		0.7		—		—			69.3
Foreign government obligations												1.3		—		—		—			1.3
Corporate and municipal bonds	1.5		—		—		—			1.5		—		30.9		—		—			30.9
U.S. Treasury obligations	511.4		—		—		—			511.4		502.3		—		—		—			502.3
U.S. government agency obligations	—		38.1		—		—			38.1		—		75.2		—		—			75.2
Agency mortgage-backed obligations	—		0.1		—		—			0.1		—		0.5		—		—			0.5
Derivatives	—		1,490.6		—		(1,184.8		)	305.8		—		428.4		—		(227.0		)	201.4
Commodities leases	—		69.9		—		1.1			71.0		—		75.8		—		—			75.8
Financial instruments sold, not yet purchased	583.4		1,607.5		—		(1,183.7		)	1,007.2		572.2		611.5		—		(227.0		)	956.7
Total liabilities at fair value	$	6,759.3	$	1,618.1	$	—	$	(7,363.1	)	$	1,014.3	$	4,075.1	$	699.2	$	—	$	(3,801.8	)	$	972.5


(1)	Represents cash collateral and the impact of netting across the levels of the fair value hierarchy. Netting among positions classified within the same level is included in that level.

The following table sets forth the Company’s financial and nonfinancial assets and liabilities accounted for at fair value, on a recurring basis, as of September 30, ~~2017~~2018 by level in the fair value hierarchy.


	September 30, 2017												September 30, 2018
(in millions)	Level 1		Level 2		Level 3		Netting and Collateral (1)			Total			Level 1		Level 2		Level 3		Netting and Collateral (1)			Total
Assets:
Unrestricted cash equivalents - certificates of deposits	$	3.8	$	—	$	—	$	—		$	3.8
Unrestricted cash equivalents - certificates of deposit													$	3.8	$	—	$	—	$	—		$	3.8
Commodities warehouse receipts	21.0		—		—		—			21.0			42.9		—		—		—			42.9
U.S. Treasury obligations	33.5		—		—		—			33.5			600.4		—		—		—			600.4
Cash, securities and other assets segregated under federal and other regulations	54.5		—		—		—			54.5
Securities and other assets segregated under federal and other regulations													643.3		—		—		—			643.3
U.S. Treasury obligations	244.7		—		—		—			244.7			778.4		—		—		—			778.4
"To be announced" (TBA) and forward settling securities	—		8.8		—		—			8.8
TBA and forward settling securities													—		5.0		—		(2.1		)	2.9
Foreign government obligations	—		6.4		—		—			6.4			7.7		—		—		—			7.7
Derivatives	2,608.6		289.1		—		(2,952.9		)	(55.2		)	7,495.9		19.6		—		(7,787.1		)	(271.6		)
Deposits with and receivables from broker-dealers, clearing organizations, and counterparties	2,853.3		304.3		—		(2,952.9		)	204.7
Common and preferred stock, ADRs, and GDRs	31.2		3.4		0.1		—			34.7
Exchangeable foreign ordinary equities, ADRs, and GDRs	9.2		1.2		—		—			10.4
Deposits with and receivables from broker-dealers, clearing organizations and counterparties													8,282.0		24.6		—		(7,789.2		)	517.4
Equity securities													71.2		3.0		—		—			74.2
Corporate and municipal bonds	28.2		0.9		—		—			29.1			—		79.1		—		—			79.1
U.S. Treasury obligations	60.0		—		—		—			60.0			120.1		—		—		—			120.1
U.S. government agency obligations	—		368.9		—		—			368.9			—		472.9		—		—			472.9
Foreign government obligations	—		10.2		—		—			10.2			6.4		—		—		—			6.4
Agency mortgage-backed obligations	—		920.9		—		—			920.9			—		1,022.5		—		—			1,022.5
Asset-backed obligations	—		47.3		—		—			47.3			—		42.9		—		—			42.9
Derivatives	1.3		1,413.4		—		(1,252.6		)	162.1			0.8		514.6		—		(329.3		)	186.1
Commodities leases	—		174.1		—		(138.7		)	35.4			—		29.5		—		(11.8		)	17.7
Commodities warehouse receipts	38.5		—		—		—			38.5			16.4		—		—		—			16.4
Exchange firm common stock	8.3		—		—		—			8.3			10.2		—		—		—			10.2
Mutual funds and other	6.0		—		—		—			6.0			6.3		—		—		—			6.3
Financial instruments owned	182.7		2,940.3		0.1		(1,391.3		)	1,731.8			231.4		2,164.5		—		(341.1		)	2,054.8
Physical commodities inventory, net	73.2		—		—		—			73.2
Physical commodities inventory													42.1		114.8		—		—			156.9
Total assets at fair value	$	3,167.5	$	3,244.6	$	0.1	$	(4,344.2	)	$	2,068.0		$	9,202.6	$	2,303.9	$	—	$	(8,130.3	)	$	3,376.2
Liabilities:
Accounts payable and other accrued liabilities - contingent liabilities	$	—	$	—	$	1.0	$	—		$	1.0
TBA and forward settling securities	—		4.9		—		(0.1		)	4.8			—		2.1		—		(2.1		)	—
Derivatives	2,476.2		292.8		—		(2,769.0		)	—			7,809.3		11.6		—		(7,820.9		)	—
Payable to broker-dealers, clearing organizations and counterparties	2,476.2		297.7		—		(2,769.1		)	4.8			7,809.3		13.7		—		(7,823.0		)	—
Common and preferred stock, ADRs, and GDRs	33.7		0.7		—		—			34.4
Exchangeable foreign ordinary equities, ADRs, and GDRs	10.3		0.2		—		—			10.5
Equity securities													51.1		0.4		—		—			51.5
Corporate and municipal bonds	0.3		—		—		—			0.3			—		20.1		—		—			20.1
U.S. Treasury obligations	285.9		—		—		—			285.9			484.8		—		—		—			484.8
U.S. government agency obligations	—		27.9		—		—			27.9			—		57.2		—		—			57.2
Agency mortgage-backed obligations	—		0.1		—		—			0.1			—		0.2		—		—			0.2
Derivatives	—		1,427.2		—		(1,110.2		)	317.0			—		688.0		—		(494.6		)	193.4
Commodities leases	—		191.1		—		(149.6		)	41.5			—		75.5		—		(16.2		)	59.3
Financial instruments sold, not yet purchased	330.2		1,647.2		—		(1,259.8		)	717.6			535.9		841.4		—		(510.8		)	866.5
Total liabilities at fair value	$	2,806.4	$	1,944.9	$	1.0	$	(4,028.9	)	$	723.4		$	8,345.2	$	855.1	$	—	$	(8,333.8	)	$	866.5


(1)	Represents cash collateral and the impact of netting across the levels of the fair value hierarchy. Netting among positions classified within the same level is included in that level.

Realized and unrealized gains and losses are included in ~~‘trading~~‘principal gains, net’, ‘interest income’, and ‘cost of sales of physical commodities’ in the condensed consolidated income statements.

~~Information on Level 3 Financial Assets and Liabilities~~

The following tables set forth a summary of changes in the fair value of the Company’s Level 3 financial assets and liabilities during the three and nine months ended June 30, 2018 and 2017, including a summary of unrealized gains (losses) during the respective periods on the Company’s Level 3 financial assets and liabilities held during the periods.

Level 3 Financial Assets For the Three and Nine Months Ended June 30, 2018
(in millions) Balances at
beginning of
period Realized gains
(losses) during
period Unrealized
gains (losses)
during period Purchases/issuances Settlements Transfers in
or (out) of
Level 3 Balances at
end of period
Assets:
Common and preferred stock, ADRs, and GDRs $ 0.1
$ —
$ (0.1 ) $ —
$ —
$ —
$ —
$ 0.1
$ —
$ (0.1 ) $ —
$ —
$ —
$ —

Level 3 Financial Assets and Financial Liabilities For the Three Months Ended June 30, 2017
(in millions) Balances at
beginning of
period Realized gains
(losses) during
period Unrealized
gains (losses)
during period Purchases/issuances Settlements Transfers in
or (out) of
Level 3 Balances at
end of period
Assets:
Common and preferred stock, ADRs, and GDRs $ 0.2
$ —
$ —
$ —
$ —
$ —
$ 0.2
Corporate and municipal bonds —
—
—
—
—
—
—
$ 0.2
$ —
$ —
$ —
$ —
$ —
$ 0.2

(in millions) Balances at
beginning of
period Realized (gains)
losses during
period Unrealized
(gains) losses
during period Purchases/issuances Settlements Transfers in
or (out) of
Level 3 Balances at
end of period
Liabilities:
Contingent liabilities $ 0.9
$ —
$ —
$ —
$ —
$ —
$ 0.9

Level 3 Financial Assets and Financial Liabilities For the Nine Months Ended June 30, 2017
(in millions) Balances at
beginning of
period Realized gains
(losses) during
period Unrealized
gains (losses)
during period Purchases/issuances Settlements Transfers in
or (out) of
Level 3 Balances at
end of period
Assets:
Common and preferred stock, ADRs, and GDRs $ 0.2
$ —
$ —
$ —
$ —
$ —
$ 0.2
Corporate and municipal bonds 3.0
—
—
—
(3.0 ) —
—
$ 3.2
$ —
$ —
$ —
$ (3.0 ) $ —
$ 0.2

(in millions) Balances at
beginning of
period Realized (gains)
losses during
period Unrealized
(gains) losses
during period Purchases/issuances Settlements Transfers in
or (out) of
Level 3 Balances at
end of period
Liabilities:
Contingent liabilities $ 0.8
$ —
$ 0.1
$ —
$ —
$ —
$ 0.9

The Company was required to make additional future cash payments based on certain financial performance measures of an acquired business. The Company was required to remeasure the fair value of contingent consideration arrangements on a recurring basis. As of September 30, 2017, the Company had classified its liability for the contingent consideration within Level 3 of the fair value hierarchy because the fair value was determined using significant unobservable inputs, which included projected cash flows. The estimated fair value of the contingent consideration arrangements was based upon management-developed earnings forecasts for the remaining contingency period, which was a Level 3 input in the fair value hierarchy. The fair value of the contingent consideration increased by $0.1 million during the nine months ended June 30, 2017, with the corresponding amount classified as ‘other’ in the condensed consolidated income statements. The contingency period for the

~~contingent consideration arrangements ended as of December 31, 2017 and the accrued balance of $1.0 million was paid during the nine months ended June 30, 2018.~~

The Company reports transfers in and out of Levels 1, 2 and 3, as applicable, using the fair value of the securities as of the beginning of the reporting period in which the transfer occurred. The Company did not have any transfers in and out of Levels 1, 2, and 3 during the three and nine months ended June 30, 2018 and 2017.

Additional disclosures about the fair value of financial instruments that are not carried on the Condensed Consolidated Balance Sheets at fair value

Many, but not all, of the financial instruments that the Company holds are recorded at fair value in the Condensed Consolidated Balance Sheets. The following represents financial instruments in which the ending balance at ~~June 30, 2018~~March 31, 2019 and September 30, ~~2017~~2018 was not carried at fair value in accordance with U.S. GAAP on the Condensed Consolidated Balance Sheets:

Short-term financial ~~instruments:~~ instruments:The carrying value of short-term financial instruments, including cash and cash equivalents, cash segregated under federal and other regulations, securities purchased under agreements to re-sell and securities sold under agreements to re-purchase, and securities borrowed and loaned are recorded at amounts that approximate the fair value of these instruments due to their short-term nature and level of collateralization. These financial instruments generally expose the Company to limited credit risk and have no stated maturities or have short-term maturities and carry interest rates that approximate market rates. Under the fair value hierarchy, cash and cash equivalents and cash segregated under federal and other regulations are classified as Level 1. Securities purchased under agreements to re-sell and securities sold under agreements to re-purchase, and securities borrowed and loaned are classified as Level 2 under the fair value hierarchy as they are generally overnight or short-term in nature and are collateralized by ~~common stock,~~equity securities, U.S. Treasury obligations, U.S. government agency obligations, agency mortgage-backed obligations, and asset-backed obligations.

Receivables and other ~~assets:~~ assets:Receivables from broker-dealers, clearing organizations, and counterparties, receivables from ~~customers,~~clients, net, notes receivables, and certain other assets are recorded at amounts that approximate fair value due to their short-term nature and are classified as Level 2 under the fair value hierarchy.

~~Payables:~~ Payables:Payables to ~~customers~~clients and payables to brokers-dealers, clearing organizations, and counterparties are recorded at amounts that approximate fair value due to their short-term nature and are classified as Level 2 under the fair value hierarchy.

Lenders under loans: Payables to lenders under loans carry variable rates of interest and are relatively short-term in duration and, thus, approximate fair value and are classified as Level 2 under the fair value hierarchy.

Term Loan: The term loan carries a variable rate of interest and thus approximates fair value and is classified as Level 2 under the fair value hierarchy.

Note 45 – Financial Instruments with Off-Balance Sheet Risk and Concentrations of Credit Risk

The Company is party to certain financial instruments with off-balance sheet risk in the normal course of its business. The Company has sold financial instruments that it does not currently own and will therefore be obliged to purchase such financial instruments at a future date. The Company has recorded these obligations in the condensed consolidated financial statements as of ~~June 30, 2018~~March 31, 2019 and September 30, ~~2017~~2018 at the fair values of the related financial instruments. The Company will incur losses if the fair value of the underlying financial instruments increases subsequent to ~~June 30, 2018~~.March 31, 2019. The total financial instruments sold, not yet purchased of ~~$1,007.2 million~~$956.7 and ~~$717.6 million~~$866.5 as of ~~June 30,~~March 31, 2018 and September 30, ~~2017,~~2018, respectively, includes ~~$305.8 million~~$201.4 and ~~$317.0 million~~$193.4 for derivative contracts, respectively, which represented a liability to the Company based on their fair values as of ~~June 30,~~March 31, 2018 and September 30, ~~2017.~~2018.

Derivatives

The Company utilizes derivative products in its trading capacity as a dealer in order to satisfy ~~customer~~client needs and mitigate risk. The Company manages risks from both derivatives and non-derivative cash instruments on a consolidated basis. The risks of derivatives should not be viewed in isolation, but in aggregate with the Company’s other trading activities. The majority of the Company’s derivative positions are included in the condensed consolidated balance sheets in ‘Deposits with and receivables from broker-dealers, clearing organizations and counterparties’, ‘Financial instruments owned, at fair value’, ‘Financial instruments sold, not yet purchased, at fair value’ and ‘Payables to broker-dealers, clearing organizations and counterparties’.

Listed below are the fair values of the Company’s derivative assets and liabilities as of ~~June 30, 2018~~March 31, 2019 and September 30, ~~2017~~.2018. Assets represent net unrealized gains and liabilities represent net unrealized losses.


	June 30, 2018						September 30, 2017						March 31, 2019						September 30, 2018
(in millions)	Assets ⁽¹⁾			Liabilities ⁽¹⁾			Assets ⁽¹⁾			Liabilities ⁽¹⁾			Assets ⁽¹⁾			Liabilities ⁽¹⁾			Assets ⁽¹⁾			Liabilities ⁽¹⁾
Derivative contracts not accounted for as hedges:
Exchange-traded commodity derivatives	$	4,789.5		$	4,771.0		$	2,094.2		$	1,975.0		$	1,360.9		$	1,312.7		$	2,455.7		$	2,499.3
OTC commodity derivatives	839.3			850.3			1,084.0			1,110.3			83.1			123.0			207.0			369.9
Exchange-traded foreign exchange derivatives	74.6			57.2			66.0			52.0			62.0			57.3			49.8			37.2
OTC foreign exchange derivatives	618.3			603.5			618.5			609.8			373.0			353.5			302.5			303.9
Exchange-traded interest rate derivatives	577.8			529.3			228.4			203.6			592.5			693.1			449.3			478.7
OTC interest rate derivatives	40.3			40.2			—			—			20.9			22.9			24.8			25.9
Exchange-traded equity index derivatives	690.5			818.4			221.3			245.4			1,539.7			1,439.8			4,541.8			4,794.0
TBA and forward settling securities	4.4			7.2			8.8			4.9			12.1			16.7			5.0			2.1
Gross fair value of derivative contracts	7,634.7			7,677.1			4,321.2			4,201.0			4,044.2			4,019.0			8,035.9			8,511.0
Impact of netting and collateral	(7,285.5		)	(7,364.2		)	(4,205.5		)	(3,879.2		)	(3,857.1		)	(3,801.8		)	(8,118.5		)	(8,317.6		)
Total fair value included in ‘Deposits with and receivables from broker-dealers, clearing organizations, and counterparties’	$	44.2					$	(46.4	)
Total fair value included in ‘Financial instruments owned, at fair value’	$	305.0					$	162.1
Total fair value included in ‘Payables to broker-dealers, clearing organizations and counterparties				$	7.1					$	4.8
Fair value included in ‘Financial instruments sold, not yet purchased, at fair value’				$	305.8					$	317.0
Total fair value included in 'Deposits with and receivables from broker-dealers, clearing organizations, and counterparties'													$	(16.6	)				$	(268.7	)
Total fair value included in 'Financial instruments owned, at fair value													$	203.7					$	186.1
Total fair value included in 'Payables to broker-dealers, clearing organizations and counterparties																$	15.8					$	—
Fair value included in 'Financial instruments sold, not yet purchased, at fair value'																$	201.4					$	193.4


(1)	As of ~~June 30, 2018~~March 31, 2019 and September 30, ~~2017~~,2018, the Company’s derivative contract volume for open positions were approximately ~~9.7~~11.0 million and ~~6.1~~10.6 million contracts, respectively.

The Company’s derivative contracts are principally held in its Commercial Hedging and Clearing and Execution Services segments. The Company assists its Commercial Hedging segment ~~customers~~clients in protecting the value of their future production by entering into option or forward agreements with them on an OTC basis. The Company also provides its Commercial Hedging segment ~~customers~~clients with option products, including combinations of buying and selling puts and calls. The Company mitigates its risk by offsetting the ~~customer’s~~client’s transaction simultaneously with one of the Company’s trading counterparties or with a similar but not identical exchange-traded position. The risk mitigation of these offsetting trades is not within the documented hedging designation requirements of the Derivatives and Hedging Topic of the ASC. These derivative contracts are traded along with cash transactions because of the integrated nature of the markets for these products. The 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 firm-wide risk management policies. In particular, the risks related to derivative positions may be partially offset by inventory, unrealized gains in inventory or cash collateral paid or received.

The Company has derivative instruments, which consist of mortgage-backed TBA securities and forward settling transactions that are used to manage risk exposures in the trading inventory of the Company’s domestic institutional fixed income business. The fair value on these transactions are recorded in deposits with and receivables from or payables to broker-dealers, clearing organizations and counterparties. Realized and unrealized gains and losses on securities and derivative transactions are reflected in ~~‘trading~~‘principal gains, net’.

As of ~~June 30, 2018~~March 31, 2019 and September 30, ~~2017~~,2018, these transactions are summarized as follows:

June 30, 2018 September 30, 2017
(in millions) Gain / (Loss) Notional Amounts Gain / (Loss) Notional Amounts
Unrealized gain on TBA securities purchased within deposits with and receivables from broker-dealers, clearing organizations and counterparties and payables to broker-dealers, clearing organizations and counterparties, respectively, and related notional amounts (1) $ 2.9
$ 829.5
$ —
$ 51.3
Unrealized loss on TBA securities purchased within deposits with and receivables from broker-dealers, clearing organizations and counterparties and payables to broker-dealers, clearing organizations and counterparties, respectively, and related notional amounts (1) $ —
$ 38.7
$ (2.9 ) $ 1,236.8
Unrealized gain on TBA securities sold within payables to broker-dealers, clearing organizations and counterparties and deposits with and receivables from broker-dealers, clearing organizations and counterparties, respectively, and related notional amounts (1) $ 0.1
$ (90.7 ) $ 5.8
$ (1,881.9 )
Unrealized loss on TBA securities sold within payables to broker-dealers, clearing organizations and counterparties and deposits with and receivables from broker-dealers, clearing organizations and counterparties, respectively, and related notional amounts (1) $ (6.9 ) $ (1,838.2 ) $ (0.1 ) $ (404.1 )
Unrealized gain (loss) on forward settling securities purchased within deposits with and receivables from broker-dealers, clearing organizations and counterparties and payables to broker-dealers, clearing organizations and counterparties, respectively, and related notional amounts (1) $ 1.4
$ 563.8
$ (2.0 ) $ 882.9
Unrealized (loss) gain on forward settling securities sold within payables to broker-dealers, clearing organizations, and counterparties and deposits with and receivables from broker-dealers, clearing organizations and counterparties, respectively, and related notional amounts (1) $ (0.3 ) $ (245.5 ) $ 3.0
$ (590.2 )
(1) The notional amounts of these instruments reflect the extent of the Company's involvement in TBA and forward settling securities and do not represent risk of loss due to counterparty non-performance.



	March 31, 2019						September 30, 2018
(in millions)	Gain / (Loss)			Notional Amounts			Gain / (Loss)			Notional Amounts
Unrealized gain on TBA securities purchased within deposits with and receivables from broker-dealers, clearing organizations and counterparties and related notional amounts	$	7.1		$	1,397.6		$	1.2		$	721.5
Unrealized loss on TBA securities purchased within deposits with and receivables from broker-dealers, clearing organizations and counterparties and related notional amounts	$	(0.4	)	$	451.8		$	(0.6	)	$	293.2
Unrealized gain on TBA securities sold within deposits with and receivables from broker-dealers, clearing organizations and counterparties and related notional amounts	$	—		$	—		$	3.2		$	(1,099.5	)
Unrealized gain on TBA securities sold within payables to broker-dealers, clearing organizations and counterparties and related notional amounts	$	0.5		$	(425.4	)	$	—		$	—
Unrealized loss on TBA securities sold within payables to broker-dealers, clearing organizations and counterparties and related notional amounts	$	(13.7	)	$	(2,260.8	)	$	—		$	—
Unrealized loss on TBA securities sold within deposits with and receivables from broker-dealers, clearing organizations and counterparties and related notional amounts	$	—		$	—		$	(1.5	)	$	(812.7	)
Unrealized gain on forward settling securities purchased within deposits with and receivables from broker-dealers, clearing organizations and counterparties and related notional amounts	$	4.5		1,258.1			$	0.5		$	614.3
Unrealized loss on forward settling securities sold within payables to broker-dealers, clearing organizations and counterparties and related notional amounts	$	(2.6	)	(1,172.7		)	$	—		$	—
Unrealized gain on forward settling securities sold within deposits with and receivables from broker-dealers, clearing organizations and counterparties and related notional amounts	$	—		—			$	0.1		$	(427.2	)
(1) The notional amounts of these instruments reflect the extent of the Company's involvement in TBA and forward settling securities and do not represent risk of loss due to counterparty non-performance.

The following table sets forth the Company’s gains (losses) related to derivative financial instruments for the three and ~~nine~~six months ended ~~June 30,~~March 31, 2019 and 2018 ~~and 2017~~ in accordance with the Derivatives and Hedging Topic of the ASC. The net gains set forth below are included in ‘Cost of sales of physical commodities’ and ~~‘Trading~~‘principal gains, net’ in the condensed consolidated income statements.


	Three Months Ended June 30,					Nine Months Ended June 30,					Three Months Ended March 31,				Six Months Ended March 31,
(in millions)	2018		2017			2018		2017			2019		2018		2019			2018
Commodities	$	38.1	$	22.0		$	71.9	$	40.8		$	36.0	$	12.3	$	44.1		$	33.8
Foreign exchange	2.9		1.7			7.7		3.7			1.8		2.5		3.7			4.8
Equity											0.7		—		(2.6		)	—
Interest rate	0.5		—			1.1		(1.0		)	—		0.2		—			0.6
TBA and forward settling securities	—		(5.4		)	10.3		3.1			10.6		10.7		1.3			10.3
Net gains from derivative contracts	$	41.5	$	18.3		$	91.0	$	46.6		$	49.1	$	25.7	$	46.5		$	49.5

Credit Risk

In the normal course of business, the Company purchases and sells financial instruments, commodities and foreign currencies as either a principal or agent on behalf of its ~~customers.~~clients. If either the ~~customer~~client or counterparty fails to perform, the Company may be required to discharge the obligations of the nonperforming party. In such circumstances, the Company may sustain a loss if the fair value of the financial instrument, commodity, or foreign currency is different from the contract value of the transaction.

The majority of the Company’s transactions and, consequently, the concentration of its credit exposure are with commodity exchanges, ~~customers,~~clients, broker-dealers and other financial institutions. These activities primarily involve collateralized and uncollateralized arrangements and may result in credit exposure in the event that a counterparty fails to meet its contractual obligations. The Company’s exposure to credit risk can be directly impacted by volatile financial markets, which may impair the ability of counterparties to satisfy their contractual obligations. The Company seeks to control its credit risk through a variety of reporting and control procedures, including establishing credit and/or position limits based upon a review of the counterparties’ financial condition and credit ratings. The Company monitors collateral levels on a daily basis for compliance with regulatory and internal guidelines and requests changes in collateral levels as appropriate.

The Company is a party to financial instruments in the normal course of its business through ~~customer~~client and proprietary trading accounts in exchange-traded and OTC derivative instruments. These instruments are primarily the result of the execution of orders for commodity futures, options on futures, OTC swaps and options and spot and forward foreign currency contracts on

behalf of its ~~customers,~~clients, substantially all of which are transacted on a margin basis. Such transactions may expose the Company to significant credit risk in the event margin requirements are not sufficient to fully cover losses which ~~customers~~clients may incur.

The Company controls the risks associated with these transactions by requiring ~~customers~~clients to maintain margin deposits in compliance with individual exchange regulations and internal guidelines. The Company monitors required margin levels daily, and therefore may require ~~customers~~clients to deposit additional collateral or reduce positions when necessary. The Company also establishes credit limits for ~~customers,~~clients, which are monitored daily. The Company evaluates each ~~customer’s~~client’s creditworthiness on a case by case basis. Clearing, financing, and settlement activities may require the Company to maintain funds with or pledge securities as collateral with other financial institutions. Generally, these exposures to both ~~customers~~clients and exchanges are subject to master netting, or ~~customer~~client agreements, which reduce the exposure to the Company by permitting receivables and payables with such ~~customers~~clients to be offset in the event of a ~~customer~~client default. Management believes that the margin deposits held as of ~~June 30, 2018~~March 31, 2019 and September 30, ~~2017~~2018 were adequate to minimize the risk of material loss that could be created by positions held at that time. Additionally, the Company monitors collateral fair value on a daily basis and adjusts collateral levels in the event of excess market exposure. Generally, these exposures to both ~~customers~~clients and counterparties are subject to master netting or ~~customer~~client agreements which reduce the exposure to the Company.

Derivative financial instruments involve varying degrees of off-balance sheet market risk whereby changes in the fair values of underlying financial instruments may result in changes in the fair value of the financial instruments in excess of the amounts reflected in the condensed consolidated balance sheets. Exposure to market risk is influenced by a number of factors, including the relationships between the financial instruments and the Company’s positions, as well as the volatility and liquidity in the markets in which the financial instruments are traded. The principal risk components of financial instruments include, among other things, interest rate volatility, the duration of the underlying instruments and changes in foreign exchange rates. The Company attempts to manage its exposure to market risk through various techniques. Aggregate market limits have been established and market risk measures are routinely monitored against these limits.

Note 56 – Allowance for Doubtful Accounts

The allowance for doubtful accounts related to receivables from ~~customers~~clients was ~~$9.9~~$10.7 million and ~~$7.6~~$10.2 million as of ~~June~~March 31, 2019 and September 30, 2018, ~~and~~ ~~September 30, 2017~~, respectively. The allowance for doubtful accounts related to deposits with and receivables from broker-dealers, clearing organizations, and counterparties was ~~$48.1~~$45.6 million and ~~$47.0~~$48.0 million as of ~~June 30, 2018~~March 31, 2019 and September 30, ~~2017,~~2018, respectively.

During the three months ended ~~June 30, 2018,~~March 31, 2019, the Company recorded bad debt expense of ~~$1.6~~$0.7 million. The bad debt expense was primarily related to ~~agricultural OTC customer~~client account deficits in the Company’s Commercial Hedging ~~segment partially offset by~~segment. During the ~~recovery~~three months ended March 31, 2018, the Company recorded bad debt expense of $0.2 million. The bad debt expense was primarily related to a precious metals ~~customer~~client trading account deficit in the Company’s Physical Commodities ~~segment.~~ segment, partially offset by bad debt recoveries in the Physical Commodities and Commercial Hedging segments.

During the ~~three~~six months ended ~~June 30, 2017,~~March 31, 2019, the Company recorded bad debt expense of ~~$0.1~~$1.0 million. The bad debt expense was primarily related to client account deficits in the Company’s Commercial Hedging and Clearing and Execution services segments. Additionally, during the six months ended March 31, 2019, the Company reached settlements with clients, paying $8.4 million related to demurrage, dead freight, and other penalty charges regarding coal supplied during fiscal 2017. The settlement amount paid was less than the accrued liability for the transactions recorded during fiscal 2017 and fiscal 2018, and accordingly the Company recorded a recovery on the bad debt on physical coal of $2.4 million in the six months ended March 31, 2019.

During the ~~nine~~six months ended ~~June 30,~~March 31, 2018, the Company recorded bad debt expense of ~~$2.9~~$0.3 million. ~~The provision for bad debts was primarily related~~Additionally, within the Company’s Physical Commodities segment, it recorded an additional provision of $1.0 million related to athe bad debt ~~in the~~on physical coal ~~business~~ for amounts due to the Company from a coal supplier for demurrage and other charges related to contracts with delivery dates subsequent to September 30, 2017 and agricultural OTC customer account deficits in the Company’s Commercial Hedging segment. During the nine months ended June 30, 2017, the Company recorded bad debt expense of $3.9 million, primarily related to $3.8 million of LME Metals customer deficits in the Company’s Commercial Hedging Segment.2017.

Note 67 – Physical Commodities Inventory

The Company’s inventories consist of finished physical commodities. Inventories by component of the Company’s Physical Commodities segment are shown below.


(in millions)	June 30, 2018		September 30, 2017		March 31, 2019		September 30, 2018
Physical Ag & Energy⁽¹⁾	$	103.5	$	65.1	$	163.3	$	114.7
Precious metals - held by broker-dealer subsidiary⁽²⁾	8.9		13.3		39.6		42.1
Precious metals - held by non-broker-dealer subsidiaries⁽³⁾	100.4		46.4		76.9		65.7
Physical commodities inventory	$	212.8	$	124.8	$	279.8	$	222.5

⁽¹⁾ Physical Ag & Energy maintains agricultural commodity inventories, including corn, soybeans, wheat, dried distillers grain, canola, sorghum, coffee, cocoa, cotton, and others. The agricultural commodity inventories are carried at net realizable value, which approximates fair value less disposal costs, with changes in net realizable value included as a component of ‘cost of sales of physical commodities’ on the condensed consolidated income statements. The agricultural inventories have reliable, readily determinable and realizable market prices, have relatively insignificant costs of disposal and are available for immediate delivery. Physical Ag & Energy also maintains energy related inventory ~~primarily kerosene,~~ which is valued at the lower of cost or net realizable value.

⁽²⁾ Precious metals held by the Company’s subsidiary, INTL FCStone Ltd, a United Kingdom based broker-dealer subsidiary, is measured at ~~fair~~net realizable value, with changes in ~~fair~~net realizable value included as a component of ~~‘trading~~‘principal gains, net’ on the condensed consolidated income statements, in accordance with U.S. GAAP accounting requirements for broker-dealers.

⁽³⁾Precious metals inventory held by subsidiaries that are not broker-dealers are valued at the lower of cost or net realizable value.

The Company has recorded lower of cost or net realizable adjustments for certain precious metals inventory of ~~$0.0~~$0.1 million and ~~$0.7~~$0.4 million as of ~~June 30, 2018~~March 31, 2019 and September 30, ~~2017~~,2018, respectively. The adjustments are included in ‘cost of sales of physical commodities’ in the condensed consolidated income statements.

Note 78 – Goodwill

The carrying value of goodwill is allocated to the Company’s operating segments as follows:


(in millions)	June 30, 2018		September 30, 2017		March 31, 2019		September 30, 2018
Commercial Hedging	$	30.3	$	30.7	$	30.3	$	30.3
Global Payments	6.3		6.3		6.9		8.9
Physical Commodities	2.4		2.4		2.4		2.4
Securities	6.8		7.7		7.0		6.8
Goodwill	$	45.8	$	47.1	$	46.6	$	48.4

The Company recorded ~~$1.3~~zero and $1.2 million in foreign exchange revaluation adjustments on goodwill for the ~~nine~~six months ended ~~June 30, 2018.~~March 31, 2019 and 2018, respectively. The Company recorded additional goodwill of $0.2 million for the six months ended March 31, 2019 within the Securities operating segment related to the acquisition of Carl Kliem S.A. The Company also recorded a reduction to goodwill of $2.0 million for the three and six months ended March 31, 2019 within the Global Payments operating segment related to measurement period adjustments on the acquisition of INTL Technology Services, LLC (formerly PayCommerce Financial Solutions, LLC) and in connection with the joint venture transaction discussed in Note 17.

Note 89 – Intangible Assets

During the three and six months ended March 31, 2019, the Company recorded indefinite-lived intangible assets not subject to amortization of $2.7 million related to the joint venture transaction discussed in Note 17.

The gross and net carrying values of intangible assets as of the balance sheet dates, by major intangible asset class are as follows (in millions):


	June 30, 2018							September 30, 2017							March 31, 2019							September 30, 2018
	Gross Amount		Accumulated Amortization			Net Amount		Gross Amount		Accumulated Amortization			Net Amount		Gross Amount		Accumulated Amortization			Net Amount		Gross Amount		Accumulated Amortization			Net Amount
Intangible assets subject to amortization:
Software programs/platforms	$	2.7	$	(2.5	)	$	0.2	$	2.7	$	(2.5	)	$	0.2	$	2.7	$	(2.6	)	$	0.1	$	2.7	$	(2.6	)	$	0.1
Customer base	20.0		(9.6		)	10.4		20.0		(7.9		)	12.1		21.4		(11.4		)	10.0		21.4		(10.1		)	11.3
Total intangible assets subject to amortization:															$	24.1	$	(14.0	)	$	10.1	$	24.1	$	(12.7	)	$	11.4

Intangible assets not subject to amortization:
Business licenses															$	2.7	$	—		$	2.7	$	—	$	—		$	—
Total intangible assets not subject to amortization:															$	2.7	$	—		$	2.7	$	—	$	—		$	—
Total intangible assets	$	22.7	$	(12.1	)	$	10.6	$	22.7	$	(10.4	)	$	12.3	$	26.8	$	(14.0	)	$	12.8	$	24.1	$	(12.7	)	$	11.4

Amortization expense related to intangible assets was ~~$1.7~~$1.3 million and ~~$2.1~~$1.1 million for the ~~nine~~six months ended ~~June 30,~~March 31, 2019 and 2018, ~~and 2017,~~ respectively. Amortization expense related to intangible assets was $0.6 million ~~and $0.7 million~~ for the three months ended ~~June 30, 2018~~March 31, 2019 and ~~2017, respectively.~~2018.

As of ~~June 30, 2018~~,March 31, 2019, the estimated future amortization expense was as follows:


(in millions)
Fiscal 2018 (remaining three months)	$	0.6
Fiscal 2019	2.2
Fiscal 2019 (remaining six months)			$	1.3
Fiscal 2020	2.0		2.2
Fiscal 2021	1.9		2.2
Fiscal 2022 and thereafter	3.9
Fiscal 2022			1.0
Fiscal 2023 and thereafter			3.4
	$	10.6	$	10.1

Note 910 – Credit Facilities

~~Variable-Rate~~Committed Credit Facilities

The Company has four committed credit facilities, including a Term Loan, under which the Company and its subsidiaries may borrow up to ~~$594.5~~$705.3 million, subject to the terms and conditions for these facilities. The amounts outstanding under these credit facilities ~~are short term borrowings and~~ carry variable rates of interest, thus approximating fair value. The Company’s committed credit facilities consist of the following:

$~~262.0~~347.8 million facility available to INTL FCStone Inc. for general working capital requirements. On February 22, 2019, the Company amended its existing $262.0 million senior secured syndicated credit facility, to extend the maturity date through February 2022 and to increase the size of the facility to $350.0 million. The amended facility is comprised of a $175.0 million revolving credit facility and a $175.0 million Term Loan facility. The credit facility is secured by a first priority lien on substantially all of the assets of the Company and those of the subsidiaries that guarantee the credit facility. The Company is required to make quarterly principal payments against the Term Loan equal to 1.25% of the original balance with the remaining balance due on the maturity date. Amounts repaid on the Term Loan may not be reborrowed.

Both the revolving credit facility and the Term Loan are subject to variable rates of interest equal to the Eurodollar Rate, as defined, or the Base Rate, as defined. Unused portions of the revolving loan facility will continue to require a commitment fee on unused borrowings, as defined in the agreement. In connection with the amendment, the Company paid $3.1 million in rating agency fees, arrangement fees, commitment fees, and other deferred financing costs. These deferred financing costs are being amortized over the 36 month term of the amended credit facility.

$75.0 million facility available to the Company’s wholly owned subsidiary, INTL FCStone Financial Inc., for short-term funding of margin to commodity exchanges. The facility is subject to annual review and guaranteed by INTL FCStone Inc.

$232.5 million facility available to the Company’s wholly owned subsidiary, FCStone Merchant Services, LLC, for financing traditional commodity financing arrangements and commodity repurchase agreements. The facility is guaranteed by INTL FCStone Inc.

$~~25.0~~50.0 million facility available to the Company’s wholly owned subsidiary, INTL FCStone Ltd, for short-term funding of margin to commodity exchanges. The facility is subject to annual review and is guaranteed by INTL FCStone Inc. The facility was amended on May 8, 2019 to increase the committed amount from $25.0 million to $50.0 million.

Uncommitted Credit Facilities

The Company also has a secured, uncommitted loan facility, under which ~~the Company’s wholly owned subsidiary,~~ INTL FCStone Ltd may borrow up to approximately ~~$25.0~~£20.0 million, collateralized by commodities warehouse receipts, to facilitate financing of commodities under repurchase agreement services to its ~~customers,~~clients, subject to certain terms and conditions of the credit agreement. There were no borrowings outstanding under this credit facility as of ~~June 30, 2018~~March 31, 2019 and September 30, ~~2017.~~2018.

The Company also has a secured, uncommitted loan facility, under which ~~the Company’s wholly owned subsidiary,~~ INTL FCStone Financial Inc., may borrow up to $75.0 million, collateralized by commodities warehouse receipts, to facilitate U.S. commodity exchange deliveries of its ~~customers,~~clients, subject to certain terms and conditions of the credit agreement. There were ~~zero and $23.0 million in~~no borrowings outstanding under this credit facility as of ~~June 30, 2018,~~March 31, 2019, and September 30, ~~2017, respectively.~~2018.

The Company also has a secured, uncommitted loan facility, under which ~~the Company’s wholly owned subsidiary,~~ INTL FCStone Financial Inc., may borrow for short term funding of firm and ~~customer~~client securities margin requirements, subject to certain terms and conditions of the agreement. The uncommitted amount available to be borrowed is not specified, and all requests for borrowing are subject to the sole discretion of the lender. The borrowings are secured by first liens on firm owned marketable securities or ~~customer~~client owned securities which have been pledged ~~under a clearing arrangement.~~to the Company. The amounts borrowed under the facilities are payable on demand. ~~As of June 30, 2018, there~~There were ~~$48.0~~zero and $14.0 million in borrowings outstanding under this credit facility ~~and no borrowings outstanding~~ as of March 31, 2019, and September 30, ~~2017.~~2018, respectively.

The Company also has a secured, uncommitted loan facility, under which ~~the Company’s wholly owned subsidiary,~~ INTL FCStone Financial Inc., may borrow up to $100.0 million for short term funding of firm and ~~customer~~client securities margin requirements, subject to certain terms and conditions of the agreement. The borrowings are secured by first liens on firm owned marketable securities or ~~customer~~client owned securities which have been pledged ~~under a clearing arrangement.~~to the Company. The amounts borrowed under the facilities are payable on demand. There were ~~zero~~no borrowings outstanding under this credit facility as of March 31, 2019 and ~~$11.0~~September 30, 2018.

The Company also has a secured, uncommitted loan facility, under which FCStone Merchant Services, LLC can borrow up to$20.0 million to facilitate the financing of inventory of commodities and other products or goods approved by the lender in its sole discretion, subject to certain terms and conditions of the loan facility agreement. The loan facility is collateralized by a first priority security interest in goods and inventory of FCStone Merchant Services, LLC that is (a) either located outside of the

U.S. and Canada or in transit to a destination outside the U.S. or Canada and (b) acquired with any extension of credit (whether in the form of a loan or by the issuance of a letter of credit) under the loan facility. The amounts borrowed under the facilities are payable on demand. There were $1.5 million and $3.8 million in borrowings outstanding under this credit facility as of ~~June 30, 2018,~~March 31, 2019, and September 30, ~~2017,~~2018, respectively.

Note Payable to Bank

The Company has a loan from a commercial bank, secured by equipment purchased with the proceeds. The note is payable in monthly installments, ending in March 2020. The note bears interest at a rate per annum equal to LIBOR plus 2.00%.

The following table sets forth a listing of credit facilities, the current committed amounts as of the report date on the facilities, and outstanding borrowings on the facilities, as well as indebtedness on a promissory note as of ~~June 30, 2018~~March 31, 2019 and September 30, ~~2017~~:2018:


(in millions)	(in millions)									(in millions)
Credit Facilities						Amounts Outstanding
															Amounts Outstanding
	Borrower	Security	Renewal / Expiration Date	Total Commitment		June 30, 2018		September 30, 2017		Borrower	Security	Renewal/Expiration Date	Total Commitment		March 31, 2019		September 30, 2018
Committed Credit Facilities	Committed Credit Facilities									Committed Credit Facilities
										Term Loan	Pledged shares of certain subsidiaries	February 22, 2022	$	172.8	$	172.8	$	—
										Revolving Line of Credit	Pledged shares of certain subsidiaries	February 22, 2022	175.0		82.0		208.2
	INTL FCStone Inc.	Pledged shares of certain subsidiaries	March 18, 2019	$	262.0	$	208.7	$	150.0	INTL FCStone Inc.			347.8		254.8		208.2
	INTL FCStone Financial, Inc.	None	April 4, 2019	75.0		—		—		INTL FCStone Financial Inc.	None	April 3, 2020	75.0		—		—
	FCStone Merchants Services, LLC	Certain commodities assets	November 1, 2019	232.5		102.5		44.2		FCStone Merchants Services, LLC	Certain commodities assets	November 1, 2019	232.5		171.5		128.0
	INTL FCStone Ltd.	None	November 7, 2018	25.0		—		—		INTL FCStone Ltd.	None	January 31, 2020	50.0		—		—
				$	594.5	311.2		194.2					$	705.3	$	426.3	$	336.2

Uncommitted Credit Facilities	Uncommitted Credit Facilities									Uncommitted Credit Facilities
	INTL FCStone Financial, Inc.	Commodities warehouse receipts and certain pledged securities	n/a	$	—	48.0		34.0		INTL FCStone Financial Inc.	Commodities warehouse receipts and certain pledged securities	n/a	n/a		—		14.0
	INTL FCStone Ltd.	Commodities warehouse receipts	n/a	$	—	—		—		INTL FCStone Ltd.	Commodities warehouse receipts	n/a	n/a		—		—
										FCStone Merchant Services, LLC	Certain commodities assets	n/a	n/a		1.5		3.8

Note Payable to Bank	Note Payable to Bank									Note Payable to Bank
	Monthly installments, due March 2020 and secured by certain equipment					1.4		2.0		Monthly installments, due March 2020 and secured by certain equipment					0.8		1.2
Total Payables to lenders under loans						$	360.6	$	230.2
Total outstanding borrowings										Total outstanding borrowings					$	428.6	$	355.2

As reflected above, ~~$362.0~~$357.5 million of the Company’s committed credit facilities are scheduled to expire within twelve months of this filing. The Company intends to renew or replace the facilities when they expire, and based on the Company’s liquidity position and capital structure, the Company believes it will be able to do so.

The Company’s credit facility agreements contain financial covenants relating to financial measures on a consolidated basis, as well as on a certain stand-alone subsidiary basis, including minimum tangible net worth, minimum regulatory capital, minimum net unencumbered liquid assets, maximum net loss, minimum fixed charge coverage ratio and maximum funded debt to net worth ratio. Failure to comply with these covenants could result in the debt becoming payable on demand. As of ~~June 30, 2018~~,March 31, 2019, the Company was in compliance with all of its financial covenants under its credit facilities.

Note 1011 – Securities and Commodity Financing Transactions

The Company’s outstanding notes receivable in connection with repurchase agreements for agricultural and energy commodities, whereby the ~~customers~~clients sell to the Company certain commodity inventory and agree to repurchase the commodity inventory at a future date at a fixed price were ~~$1.0~~$0.1 million and ~~$0.8~~$1.9 million as of ~~June 30, 2018~~March 31, 2019 and September 30 ~~2017,~~2018, respectively.

The Company enters into securities purchased under agreements to resell, securities sold under agreements to repurchase, securities borrowed and securities loaned transactions to, among other things, finance financial instruments, acquire securities to cover short positions, acquire securities for settlement, and to accommodate counterparties’ needs. These agreements are recorded as

collateralized financings at their contractual amounts plus accrued interest. The related interest is recorded in the condensed consolidated income statements as interest income or interest expense, as applicable. In connection with these agreements and transactions, it is the policy of the Company to receive or pledge cash or securities to adequately collateralize such agreements and transactions in accordance with general industry guidelines and practices. The value of the collateral is valued daily and the Company may require counterparties to deposit additional collateral or return collateral pledged, when appropriate. The carrying amounts of these agreements and transactions approximate fair value due to their short-term nature and the level of collateralization.

The Company pledges financial instruments owned to collateralize repurchase agreements. At ~~June 30, 2018~~March 31, 2019 and September 30, ~~2017,~~2018, financial instruments owned, at fair value of ~~$17.3~~$285.5 million and ~~$19.4~~$123.0 million, respectively, were pledged as collateral under repurchase agreements. The counterparty has the right to repledge the collateral in connection with these transactions. These financial instruments owned have been pledged as collateral and have been parenthetically disclosed on the condensed consolidated balance sheet.

The Company also has repledged securities borrowed and customer securities held under custodial clearing arrangements to collateralize securities loaned agreements with a fair value of $193.9 million and $108.4 million as of June 30, 2018, and September 30, 2017, respectively. Additionally, the Company has also pledged customer securities held under custodial clearing arrangements with a fair value of $58.8 million and $12.7 million as of June 30, 2018, and September 30, 2017, respectively, to collateralize uncommitted loan facilities with certain banks as discussed further in Note 9.

In addition, as of ~~June 30, 2018~~March 31, 2019 and September 30, ~~2017,~~2018, the Company pledged financial instruments owned, at fair value of ~~$1,364.5~~$1,243.2 million and ~~$1,306.4~~$1,481.1 million, respectively, and securities received under reverse repurchase agreements of ~~$252.1~~$901.3 million and ~~$100.2~~$369.8 million, respectively, to cover collateral requirements for tri-party repurchase agreements. For these securities, the counterparties do not have the right to sell or repledge the collateral and, therefore, they have not been parenthetically disclosed on the condensed consolidated balance sheet.

The Company also has repledged securities borrowed and client securities held under custodial clearing arrangements to collateralize securities loaned agreements with a fair value of $1,352.8 million and $267.9 million as of March 31, 2019, and September 30, 2018, respectively. Additionally, the Company has also pledged financial instruments owned with a fair value of $9.1 million and $27.1 million as of March 31, 2019, and September 30, 2018, respectively, to collateralize uncommitted loan facilities with certain banks as discussed further in Note 10.

At ~~June~~March 31, 2019 and September 30, 2018, the Company ~~has~~had accepted collateral that it is permitted by contract to sell or repledge. This collateral consists primarily of securities received in reverse repurchase agreements, securities borrowed agreements, and margin securities held on behalf of correspondent ~~brokers under custodial clearing agreements.~~brokers. The fair value of such collateral at ~~June 30, 2018~~March 31, 2019 and September 30, ~~2017,~~2018, was ~~$1,091.3 million~~$2,746.5 and ~~$631.7~~$1,294.8 million, respectively, of which ~~$515.6~~$441.1 million and ~~$306.9~~$473.9 million, respectively, was used to cover securities sold short which are recorded in financial instruments sold, not yet purchased on the condensed consolidated balance sheet. In the normal course of business, this collateral is used by the Company to cover financial instruments sold, not yet purchased, to obtain financing in the form of repurchase agreements or bank loans, and to meet counterparties’ needs under lending arrangements.

The following tables provide the contractual maturities of gross obligations under repurchase and securities lending agreements as of ~~June 30, 2018~~March 31, 2019 and September 30, ~~2017~~2018 (in millions):


	June 30, 2018										March 31, 2019
	Overnight and Open		Less than 30 Days		30-90 Days		Over 90 Days		Total		Overnight and Open		Less than 30 Days		30-90 Days		Over 90 Days		Total
Securities sold under agreements to repurchase	$	699.1	$	584.9	$	305.0	$	10.0	$	1,599.0	$	1,179.3	$	847.4	$	338.0	$	20.0	$	2,384.7
Securities loaned	204.3		—		—		—		204.3		1,376.5		—		—		—		1,376.5
Gross amount of secured financing	$	903.4	$	584.9	$	305.0	$	10.0	$	1,803.3	$	2,555.8	$	847.4	$	338.0	$	20.0	$	3,761.2


	September 30, 2017										September 30, 2018
	Overnight and Open		Less than 30 Days		30-90 Days		Over 90 Days		Total		Overnight and Open		Less than 30 Days		30-90 Days		Over 90 Days		Total
Securities sold under agreements to repurchase	$	640.2	$	432.9	$	320.0	$	—	$	1,393.1	$	934.9	$	661.3	$	340.5	$	—	$	1,936.7
Securities loaned	111.1		—		—		—		111.1		277.9		—		—		—		277.9
Gross amount of secured financing	$	751.3	$	432.9	$	320.0	$	—	$	1,504.2	$	1,212.8	$	661.3	$	340.5	$	—	$	2,214.6

The following table provides the underlying collateral types of the gross obligations under repurchase and securities lending agreements as of ~~June 30, 2018~~March 31, 2019 and September 30, ~~2017~~2018 (in millions):


Securities sold under agreements to repurchase:	June 30, 2018		September 30, 2017
Securities sold under agreements to repurchase					March 31, 2019		September 30, 2018
U.S. Treasury obligations	$	3.0	$	7.0	$	122.6	$	39.6
U.S. government agency obligations	342.6		332.6		372.8		461.7
Asset-backed obligations	77.6		36.4		86.5		50.0
Agency mortgage-backed obligations	1,175.8		1,017.1		1,802.8		1,385.4
Total securities sold under agreements to repurchase	1,599.0		1,393.1
Total securities sold under agreement to repurchase					2,384.7		1,936.7

Securities loaned:
Common stock	204.3		111.1
Securities loaned
Equity securities					1,376.5		277.9
Total securities loaned	204.3		111.1		1,376.5		277.9
Gross amount of secured financing	$	1,803.3	$	1,504.2	$	3,761.2	$	2,214.6

Note 1112 – Commitments and Contingencies

Contingencies

During the week ended November 16, 2018, balances in approximately 300 accounts of the FCM division of the Company’s wholly owned subsidiary, INTL FCStone Financial Inc., declined below required maintenance margin levels, primarily as a result of significant and unexpected price fluctuations in the natural gas markets. All positions in these accounts, which were managed by OptionSellers.com Inc. (“OptionSellers”), an independent Commodity Trading Advisor (“CTA”), were liquidated in accordance with the INTL FCStone Financial Inc.’s client agreements and obligations under market regulation standards.

A CTA is registered with the U.S. Commodity Futures Trading Commission (“CFTC”) and a member of, and subject to audit by, the National Futures Association (“NFA”). OptionSellers is registered under a CFTC Rule 4.7 exemption for “qualified eligible persons,” which requires the account holders authorizing OptionSellers to act as their CTA to meet or exceed certain minimum financial requirements. OptionSellers, in its role as a CTA, had been granted by each of its clients full discretionary authority to manage the trading in the client accounts, while INTL FCStone Financial Inc. acted solely as the clearing firm in its role as the FCM.

INTL FCStone Financial Inc.’s client agreements hold account holders liable for all losses in their accounts and obligate the account holders to reimburse INTL FCStone Financial for any account deficits in their accounts. As of March 31, 2019, the aggregate receivable from these client accounts, net of collections and other allowable deductions, was $29.4 million, with no individual account receivable exceeding $1.4 million. INTL FCStone Financial Inc. continues to pursue collection of these receivables and intends both to enforce and to defend its rights aggressively, and to claim interest and costs of collection where applicable.

INTL FCStone Financial Inc. has been named in arbitrations brought by clients seeking damages relating to the trading losses in these accounts. The Company believes that such cases are without merit and intend to defend them vigorously. At the same time, the Company has initiated numerous arbitration proceedings against clients to recover deficit balances in their accounts. The Company believes it has a valid claim against its clients, based on the express language of the customer contracts and legal precedent, and intends to pursue collection of these claims vigorously.

The Company has done an assessment of the collectability of these accounts, considered the status of arbitration proceedings, and has concluded that it does not have a sufficient basis to record an allowance against these uncollected balances. As the Company moves through the collection and arbitration processes and additional information becomes available, the Company will continue to consider the need for an allowance against the carrying value of these uncollected balances. Depending on future collections and arbitration proceedings, any provisions for bad debts and actual losses ultimately may or may not be material to the Company’s financial results. Currently, the Company does not believe that any potential losses related to this matter would impact its ability to comply with its ongoing liquidity, capital, and regulatory requirements.

Legal Proceedings

From time to time and in the ordinary course of business, the Company is involved in various legal actions and proceedings, including tort claims, contractual disputes, employment matters, workers’ compensation claims and collections. The Company carries insurance that provides protection against certain types of claims, up to the policy limits of the insurance.

As of ~~June 30, 2018~~March 31, 2019 and September 30, ~~2017~~,2018, the condensed consolidated balance sheets include loss contingency accruals which are not material, individually or in the aggregate, to the Company’s financial position or liquidity. In the opinion of management, possible exposure from loss contingencies in excess of the amounts accrued, is not likely to be material to the Company’s earnings, financial position or liquidity.

~~The following is a summary of a significant legal matter involving the Company:~~

~~Sentinel Litigation~~

~~Prior~~There have been no material changes to the July 1, 2015 merger into INTL FCStone Financial, our subsidiary, FCStone, LLC, had a portion of its excess segregated funds invested with Sentinel Management Group Inc. (“Sentinel”), a registered futures commission merchant (“FCM”)legal actions and ~~an Illinois-based money manager that provided cash management services~~proceedings compared to other FCMs. In August 2007, Sentinel halted redemptions to customers and sold certain of the assets it managed to an unaffiliated third party at a significant discount. On August 17, 2007, subsequent to Sentinel’s sale of certain assets, Sentinel filed for bankruptcy protection. In aggregate, $15.5 million of FCStone, LLC’s $21.9 million in invested funds were returned to it before and after Sentinel’s bankruptcy petition. A further amount of $2.0 million was held by the bankruptcy trustee in reserve in the name of FCStone, LLC.

In August 2008, the bankruptcy trustee of Sentinel filed adversary legal proceedings against FCStone, LLC and a number of other FCMs, seeking recovery of pre- and post-petition transfers totaling $15.5 million.

On April 23, 2018, following ten years of legal proceedings and a final ruling by the United States Court of Appeals for the Seventh Circuit against the trustee and in favor of INTL FCStone Financial, the United States Supreme Court denied the trustee’s petition for writ of certiorari. Following this, on May 1, 2018, INTL FCStone Financial received funds from the reserve account in the amount of $2.0 million. This amount is presented in ‘other gain’ in the condensed consolidated income statement.

The Company’s assessments are based on estimates and assumptions that have been deemed reasonable by management, but that may later prove to be incomplete or inaccurate, and unanticipated events and circumstances may occur that might cause it to change those estimates and assumptions.September 30, 2018.

Contractual Commitments

Self-Insurance

The Company self-insures its costs related to medical and dental claims. The Company is self-insured, up to a stop loss amount, for eligible participating employees and retirees, and for qualified dependent medical and dental claims, subject to deductibles and limitations. As of ~~June 30, 2018,~~March 31, 2019, the Company had $0.8 million accrued for self-insured medical and dental claims included in ‘accounts payable and other liabilities’ in the condensed consolidated balance sheet.

Note 1213 – Capital and Other Regulatory Requirements

The Company’s activities are subject to significant governmental regulation, both in the United States and in the international jurisdictions in which it operates. The subsidiaries of the Company were in compliance with all of their regulatory requirements, as of ~~June 30, 2018, as~~ follows:


(in millions)				As of June 30, 2018							As of March 31, 2019
Subsidiary	Regulatory Authority	Jurisdiction	Requirement Type	Actual		Minimum Requirement		Regulatory Authority	Jurisdiction	Requirement Type	Actual		Minimum Requirement
INTL FCStone Financial Inc.	SEC and Commodity Futures Trading Commission ("CFTC")	United States	Net capital	$	157.0	$	93.3	SEC and CFTC	United States	Net capital	$	165.3	$	85.5
INTL FCStone Financial Inc.	CFTC	United States	Segregated funds	$	2,452.9	$	2,397.0	CFTC	United States	Segregated funds	$	2,120.7	$	2,064.7
INTL FCStone Financial Inc.	CFTC	United States	Secured funds	$	162.6	$	144.8	CFTC	United States	Secured funds	$	129.7	$	114.1
INTL FCStone Financial Inc.	SEC	United States	Customer reserve	$	—	$	—	SEC	United States	Customer reserve	$	—	$	—
INTL FCStone Financial Inc.	SEC	United States	PAB reserve	$	—	$	—	SEC	United States	PAB reserve	$	—	$	—
INTL Custody & Clearing Solutions Inc.	SEC	United States	Net capital	$	2.0	$	0.1
SA Stone Wealth Management Inc.	SEC	United States	Net capital	$	3.7	$	0.5	SEC	United States	Net capital	$	4.9	$	0.4
INTL FCStone Ltd(1)								Financial Conduct Authority ("FCA")	United Kingdom	Net capital	$	235.7	$	111.8
INTL FCStone Ltd⁽¹⁾⁽²⁾	Financial Conduct Authority ("FCA")	United Kingdom	Net capital	$	193.2	$	91.7	FCA	United Kingdom	Segregated funds	$	169.9	$	175.3
INTL FCStone Ltd	FCA	United Kingdom	Segregated funds	$	167.4	$	163.4
INTL Netherlands BV⁽¹⁾	FCA	United Kingdom	Net capital	$	192.4	$	91.7
INTL Netherlands BV(1)								FCA	United Kingdom	Net capital	$	239.5	$	112.7
INTL FCStone DTVM Ltda.	Brazilian Central Bank and Securities and Exchange Commission of Brazil	Brazil	Capital adequacy	$	11.6	$	2.2	Brazilian Central Bank and Securities and Exchange Commission of Brazil	Brazil	Capital adequacy	$	12.4	$	0.4
INTL FCStone Banco de Câmbio S.A.								Brazilian Central Bank and Securities and Exchange Commission of Brazil	Brazil	Capital adequacy	$	3.1	$	1.7
INTL Gainvest S.A.	National Securities Commission ("CNV")	Argentina	Capital adequacy	$	4.7	$	0.1	National Securities Commission ("CNV")	Argentina	Capital adequacy	$	4.2	$	0.1
INTL Gainvest S.A.	CNV	Argentina	Net capital	$	1.4	$	0.1	CNV	Argentina	Net capital	$	0.7	$	0.1
INTL CIBSA S.A.	CNV	Argentina	Capital adequacy	$	4.8	$	0.6	CNV	Argentina	Capital adequacy	$	5.1	$	0.4
INTL CIBSA S.A.	CNV	Argentina	Net capital	$	0.9	$	0.4	CNV	Argentina	Net capital	$	1.2	$	0.2

⁽¹⁾ INTL Netherlands BV is a holding company that includes the ownership equity of INTL FCStone Ltd. The associated net capital amounts and minimum requirements should not be considered in aggregate.

⁽²⁾ INTL FCStone Ltd had a shortfall of segregated client funds as of March 31, 2019, however, an additional deposit was made in the week following period end to rectify the shortfall in accordance with local regulatory procedure.

Certain other non-U.S. subsidiaries of the Company are also subject to capital adequacy requirements promulgated by authorities of the countries in which they operate. As of ~~June 30, 2018~~,March 31, 2019, these subsidiaries were in compliance with their local capital adequacy requirements.

Note 1314 – Other Expenses

Other expenses for the three and ~~nine~~six months ended ~~June 30,~~March 31, 2019 and 2018 ~~and 2017~~ consisted of the following:


	Three Months Ended June 30,				Nine Months Ended June 30,				Three Months Ended March 31,				Six Months Ended March 31,
(in millions)	2018		2017		2018		2017		2019		2018		2019		2018
Contingent consideration, net	$	—	$	—	$	—	$	0.1
Insurance	0.7		0.7		1.9		2.0		0.9		0.6		1.7		1.2
Advertising, meetings and conferences	1.0		1.0		5.3		3.1		1.5		3.4		2.9		4.3
Office supplies and printing	0.5		0.6		1.3		1.7		0.5		0.4		1.0		0.8
Other clearing related expenses	0.8		0.9		1.8		1.6		0.7		0.5		1.1		1.0
Other non-income taxes	1.3		1.2		3.8		3.5		1.2		1.3		2.1		2.5
Other	1.7		2.3		6.3		6.9		2.6		2.5		5.1		4.6
Total other expenses	$	6.0	$	6.7	$	20.4	$	18.9	$	7.4	$	8.7	$	13.9	$	14.4

Note 1415 – Accumulated Other Comprehensive Loss, Net

Comprehensive income consists of net income and other gains and losses affecting stockholders’ equity that, under U.S. GAAP, are excluded from net income. Other comprehensive loss includes net actuarial losses from defined benefit pension plans and foreign currency translation adjustments.

The following table summarizes the changes in accumulated other comprehensive loss, net for the ~~nine~~six months ended ~~June 30, 2018.~~March 31, 2019.

(in millions) Foreign Currency Translation Adjustment Pension Benefits Adjustment Accumulated Other Comprehensive Loss
Balances as of September 30, 2017 $ (21.5 ) $ (3.0 ) $ (24.5 )
Other comprehensive loss, net of tax (8.7 ) —
(8.7 )
Balances as of June 30, 2018 $ (30.2 ) $ (3.0 ) $ (33.2 )



(in millions)	Foreign Currency Translation Adjustment			Pension Benefits Adjustment			Accumulated Other Comprehensive Loss
Balances as of September 30 2018	$	(30.5	)	$	(2.6	)	$	(33.1	)
Other comprehensive income, net of tax	0.3			—			0.3
Balances as of March 31, 2019	$	(30.2	)	$	(2.6	)	$	(32.8	)

Note 1516 – Income Taxes

The income tax provision for interim periods is comprised of tax on ordinary income (loss) provided at the most recent estimated annual effective tax rate, adjusted for the tax effect of discrete items. Management uses an estimated annual effective tax rate based on the forecasted pretax income (loss) and statutory tax rates in the various jurisdictions in which it operates. The Company’s effective tax rate differs from the U.S. statutory rate primarily due to state and local taxes, global intangible low taxed income, a bargain purchase gain, and differing statutory tax rates applied to the income of non-U.S. subsidiaries. The Company records the tax effect of certain discrete items, including the effects of changes in tax laws, tax rates and adjustments with respect to valuation allowances or other unusual or nonrecurring tax adjustments, in the interim period in which they occur, as an addition to, or reduction from, the income tax provision, rather than being included in the estimated effective annual income tax rate. In addition, jurisdictions with a projected loss for the year or a year-to-date loss where no tax benefit can be recognized are excluded from the estimated annual effective income tax rate.

The Company is required to assess its deferred tax assets and the need for a valuation allowance at each reporting period. This assessment requires judgment on the part of management with respect to benefits that may be realized. The Company will record a valuation allowance against deferred tax assets when it is considered more likely than not that all or a portion of the deferred tax assets will not be realized.

Effects of the Tax Cuts and Jobs Act

On December 22, 2017, the President of the United States signed and enacted into law H.R. 1, the Tax Cuts and Jobs Act (“the Tax Reform”). Among the significant changes to the U.S. Internal Revenue Code, the Tax Reform ~~lowers~~lowered the U.S. federal corporate income tax rate from 35% to 21%, effective January 1, 2018. The Company will compute its income tax expense (benefit) for the September 30, ~~2018~~2019 tax year using a U.S. statutory tax rate of ~~24.5%~~21%. The ~~21%~~Company computed income tax expense for the year ended September 30, 2018 using a U.S. statutory tax rate ~~will apply to fiscal years ending September 30, 2019 and thereafter. For the nine months ended June 30, 2018, the Company recorded tax expense~~ of $8.8 million related to the remeasurement of deferred tax assets and liabilities. For the three months ended December 31, 2017, the Company recorded tax expense of $8.9 million related to the remeasurement of deferred tax assets and liabilities. Due to additional information becoming available in the three months ended March 31, 2018, the Company recorded a benefit of $0.1 million related to the remeasurement of deferred tax assets and liabilities. There were no adjustments recorded in the three months ended June 30, 2018. This amount remains provisional.24.5%. The Tax Reform ~~also includes~~imposed a one-time mandatory repatriation transition tax on previously untaxed accumulated and current earnings and profits ~~(E&P)~~(“E&P”) of certain ~~of the Company’s~~ foreign subsidiaries. To determine the amount of the transition tax, the Company must determine, in addition to other factors, the amount of post 1986 E&P of the relevant subsidiaries, as well as the amount of non-US income taxes paid on such earnings. The Company made a reasonable estimate of the transition tax and recorded a provisional transition tax obligation of $12.0 million in the three months ended December 31, 2017. In the three months ended March 31, 2018, the Company recorded a benefit of $0.7 million due to revised E&P computations, net operating loss carryforward available, and revised non-US income taxes paid. There were no adjustments recorded in the three months ended June 30, 2018. The total provisional transition tax obligation to date is $11.3 million. The Company continues to gather additional information to more precisely compute the amount of the transition tax.

The SEC staff issued Staff Accounting Bulletin No. 118 (SAB 118), which provides guidance on accounting for the tax effects of the Tax Reform. SAB 118 provides a measurement period that should not extend beyond one year from the Tax Reform enactment date for companies to complete the accounting under ASC 740. In accordance with SAB 118, a company must reflect the income tax effects of those aspects of the Tax Reform for which the accounting under ASC 740 is complete. To the extent that a company’s accounting for certain income tax effects of the Tax Reform is incomplete but it can determine a reasonable estimate, it must record a provisional estimate in the financial statements. If a company cannot determine a

~~provisional estimate to be included in the financial statements, it should continue to apply ASC 740 based on the tax laws that were in effect immediately before the enactment of the Tax Reform.~~

While the Company can make reasonable estimates of the impact of the reduction in corporate rate and the deemed repatriation transition tax, the final impact of the Tax Reform may differ from these estimates, due to, among other things, changes in interpretations and assumptions, additional guidance that may be issued by taxing authorities, and actions the Company may take.

The Tax Reform also establishes new tax laws that will affect the fiscal year ending September 30, 2019, including, but not limited to, (1) elimination of the corporate alternative minimum tax, (2) a new provision designed to tax global intangible low-taxed income ~~(GILTI)~~(“GILTI”), (3) limitations on the utilization of net operating losses ~~generated~~incurred in tax years beginning after ~~December 31, 2017~~September 30, 2018 to ~~80 percent~~80% of taxable income per tax year, (4) the creation of the base erosion anti-abuse tax ~~(BEAT)~~(“BEAT”), (5) a

general elimination of U.S. federal income taxes on dividends from foreign subsidiaries, and (6) limitations on the deductibility of interest expense and certain executive compensation.

Effects of tax law changes where a reasonable estimate of the accounting effects has not yet been made include additional limitations on certain meals and entertainment expenses and the unlimited carryforward of net operating losses. The Company has also not yet determined the potential tax impact of provisions that are not yet effective, such as GILTI, BEAT, elimination of U.S. tax on dividends of future foreign earnings, and a limitation of the utilization of net operating losses generated after fiscal 2018 to 80 percent of taxable income per tax year. The Company expects to makemade the policy election to treat GILTI as a current period expense when incurred. The estimated impact of GILTI is included in the forecasted effective tax rate and increases the effective rate by approximately 1%.

The SEC staff issued Staff Accounting Bulletin No. 118 (“SAB 118”), which provides guidance on accounting for the tax effects of the Tax Reform. SAB 118 provides a provisional measurement period that should not extend beyond one year from the Tax Reform enactment date for companies to complete the accounting under ASC 740, Income Taxes. The Company’s income tax accounting provisional measurement period for the Tax Reform concluded during the three months ended December 31, 2018 with no adjustments to the provisional amounts previously recorded.

For the three months ended December 31, 2017, the Company recorded tax expense of $8.9 million related to the remeasurement of deferred tax assets and liabilities based on the information available. As a result of additional information becoming available after December 31, 2017, the Company recorded a benefit of $0.3 million during the remainder of fiscal ~~year ending~~2018 related to the remeasurement of deferred tax assets and liabilities, and as of September 30, ~~2019.~~2018, the accounting for the remeasurement of the deferred tax assets and liabilities was complete.

The Tax Reform also included a one-time mandatory repatriation transition tax on previously untaxed accumulated and current E&P of certain of the Company’s foreign subsidiaries. To determine the amount of the transition tax, the Company determined, in addition to other factors, the amount of post 1986 E&P of the relevant subsidiaries, as well as the amount of non-U.S. income taxes paid on such earnings. The Company made a reasonable estimate of the transition tax and recorded a provisional transition tax obligation of $12.0 million in the three months ended December 31, 2017. The Company recorded benefits of $0.7 million and $0.1 million during the three months ended March 31, 2018 and the remainder of fiscal 2018, respectively, due to revised E&P computations, refinement of the net operating loss carryforward available, and revised non-US income taxes paid. As of December 31, 2018, the accounting for the one-time mandatory repatriation transition tax on previously untaxed accumulated and current E&P of certain of the Company’s foreign subsidiaries is complete.

Current and Prior Period Tax Expense

Income tax expense of ~~$8.9~~$7.5 million and ~~$2.3~~$6.8 million for the three months ended ~~June 30,~~March 31, 2019 and 2018, ~~and 2017,~~ respectively, and income tax expense of ~~$41.2~~$13.7 million and ~~$7.7~~$32.3 million for the ~~nine~~six months ended ~~June 30,~~March 31, 2019 and 2018, ~~and 2017,~~ respectively, reflect estimated federal, foreign, state and local taxes. Due to Tax Reform, the Company recorded discrete expense of $20.1 ~~million.~~million during the six months ended March 31, 2018. This consists of expense of $20.9 million in the three months ended December 31, 2017, and benefit of $0.8 million in the three months ended March 31, 2018. ~~There were no adjustments recoded in the three months ended June 30, 2018.~~ Tax expense, excluding the discrete expense related to the Tax Reform, was ~~$8.8~~$7.6 million for the three months ended ~~June 30,~~March 31, 2018, and ~~$21.0~~$12.2 million for the ~~nine~~six months ended ~~June 30,~~March 31, 2018.

For the three months ended ~~June 30,~~March 31, 2019 and 2018, ~~and 2017,~~ the Company’s effective tax rate was ~~27%~~24% and ~~15%~~23%, respectively. For the ~~nine~~three months ended ~~June 30,~~March 31, 2019, the effective rate was higher than the U.S. federal statutory rate of 21% due to U.S. state and local taxes, GILTI, and US and foreign permanent differences. The Company’s effective tax rate decreased 0.1% and 0.3% for the three months ended March 31, 2019 and 2018, respectively, due to excess tax benefits on share-based compensation.

For the six months ended March 31, 2019 and ~~2017,~~2018, the Company’s effective tax rate was ~~51%~~25% and ~~20%~~67%, respectively. For the ~~nine~~six months ended ~~June 30,~~March 31, 2018, the discrete expense of $20.1 million related to Tax Reform, increased the effective tax rate by ~~25%~~42%. The effective rate for the ~~nine~~six months ended ~~June~~March 31, 2018 was ~~26%~~25%, excluding the impacts of Tax Reform. The Company’s effective tax rate decreased ~~0.4%~~0.1% and 0.6% for the six months ended March 31, 2019 and 2018, respectively, due to excess tax benefits on share-based ~~compensation recognized through~~compensation.

Deferred income tax balances reflect the ~~first nine months~~effects of temporary differences between the carrying amounts of assets and liabilities and their tax bases and are stated at enacted tax rates expected to be in effect when taxes are actually paid or recovered. As of March 31, 2019 and September 30, 2018, ~~related~~the Company has net operating loss carryforwards for U.S. federal, state, local, and foreign income tax purposes of $9.4 million, net of valuation allowances, which are available to offset future taxable income in these jurisdictions. The state and local net operating loss carryforwards of $5.7 million, net of valuation allowance, begin to expire after September 2020. INTL Asia Pte. Ltd. has a Singapore net operating loss carryforward of $2.9 million. This Singapore net operating loss has an indefinite carryforward and, in the ~~adoption~~judgment of ~~ASU 2016-09. See Note 1 for~~management, is more ~~information regarding the adoption of ASU 2016-09. The effective rate, excluding the impacts~~likely than not to be realized. As a result of Tax Reform, ~~was higher than~~ the ~~U.S. federal statutory rate due~~alternative minimum tax (“AMT”) credit carryforward deferred tax asset has been reclassified to ~~U.S. state and local~~income taxes ~~and~~receivable. The Company can continue to utilize AMT credits to offset regular income tax liability in fiscal years 2019 through 2021. Any remaining amount is fully refundable by fiscal year 2022. In fiscal 2018, the Company generated $6.5 million in foreign ~~permanent differences.~~tax credit carryforwards as part of the mandatory repatriation transition tax. These credits expire in fiscal year 2028. In the judgment of management, the Company believes that sufficient taxable income will be earned to utilize the foreign tax credit carryforwards within 10 years.

The valuation allowance for deferred tax assets as of ~~June 30, 2018~~March 31, 2019 and September 30, ~~2017~~2018 was ~~$4.5 million and $4.0 million, respectively.~~$3.5 million. The valuation allowances as of ~~June 30, 2018~~March 31, 2019 and September 30, ~~2017~~2018 were primarily related to U.S., state and local net operating loss carryforwards and foreign net operating loss carryforwards that, in the judgment of management, are not more likely than not to be realized. ~~In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some or all of the deferred tax assets will not be realized.~~

The Company incurred U.S. federal, state, and local taxable (losses) income for the fiscal years ended September 30, 2017, 2016, and 2015 of $(20.5) million, $(9.7) million and $16.5 million, respectively. The differences between actual levels of past taxable (losses) income and pre-tax book (losses) income are primarily attributable to temporary differences in these jurisdictions. When evaluating if U.S. federal, state, and local deferred ~~tax assets~~taxes are realizable, the Company ~~considered~~considers when deferred tax liabilities ~~of $3.3 million that~~ are scheduled to reverse ~~from 2018 to 2020 and $2.2 million of~~as well as deferred tax liabilities associated with unrealized gains in securities which the Company could sell, if necessary. Furthermore, the Company ~~considered~~considers its ability to implement business and tax planning strategies that would allow the remaining U.S. federal, state, and local deferred tax assets, net of valuation allowances, to be realized ~~within approximately 5~~in less than 10 years. Based on the current and projected profitability of the Company, as well as tax planning strategies that ~~are prudent and feasible,~~can be implemented, management believes that it is more likely than not that the Company will realize the tax benefit of the deferred tax assets, net of the existing valuation ~~allowance,~~allowances, in the future. ~~However,~~

As of March 31, 2019 and September 30, 2018, the ~~realization~~Company has accumulated undistributed earnings generated by its foreign subsidiaries of ~~deferred~~approximately $378.8 million and $354.7 million, respectively. The Company recognized the mandatory repatriation tax related to these undistributed earnings as part of the Tax Reform and, as a result, repatriation of these amounts would not be subject to additional U.S. federal income tax but may be subject to applicable foreign withholding and state taxes ~~is dependent on future events,~~in the relevant jurisdictions. The Company does not intend to distribute earnings in a taxable manner, and ~~changes~~therefore intends to limit distributions to earnings previously taxed in ~~estimates~~the U.S., or earnings that would qualify for the 100 percent dividends received deduction provided for in ~~future periods could~~the Tax Reform Act, and earnings that would not result in ~~adjustments to~~any significant foreign taxes. The Company has repatriated $13 million during fiscal 2019 of earnings previously taxed in the ~~valuation allowance.~~U.S. resulting in no significant taxes. Therefore, the Company has not recognized a deferred tax liability on its investment in foreign subsidiaries.

The Company and its subsidiaries file income tax returns with the U.S. federal jurisdiction and various state, local and foreign jurisdictions. The Company has open tax years ranging from September 30, 2010 through September 30, ~~2017~~2018 with U.S. federal and state and local taxing authorities. The Company is currently under examination by the U.S. Internal Revenue Service for the 2016 fiscal tax year; however, no additional tax liability is expected. In the United Kingdom (“U.K.”), the Company has open tax years ~~ranging from~~ending September 30, ~~2016~~2017 to

September 30, ~~2017.~~2018. In Brazil, the Company has open tax years ranging from December 31, ~~2012~~2013 through December 31, ~~2017.~~2018. In Argentina, the Company has open tax years ranging from September 30, ~~2010~~2011 to September 30, ~~2017.~~2018. In Singapore, the Company has open tax years ranging from September 30, ~~2012~~2014 to September 30, ~~2017.~~2018.

Note 17 - Acquisitions

GMP Securities LLC

On December 11, 2018 the Company executed a stock purchase agreement with GMP International Holdings Corp., a wholly-owned subsidiary of Canada-based GMP Capital Inc., to acquire 100% its U.S.-based broker-dealer subsidiary, GMP Securities LLC (“GMP”), formerly known as Miller Tabak Securities, LLC, an independent, SEC-registered broker-dealer and FINRA member. GMP has an institutional fixed-income trading business which deals in high yield, convertible and emerging market debt and makes markets in certain equity securities. This transaction also involved the purchase of GMP’s U.S.-based parent. This acquisition allows the Company to expand its fixed income product offerings to clients and adds over 2,400 new institutional clients who can benefit from the Company’s full suite of financial services.

The transaction was subject to regulatory approval which was obtained in January 2019 with the acquisition closing on January 14, 2019. The aggregate cash purchase price of $8.2 million for all of the outstanding shares of GMP and its U.S.-based parent was equal to the final net tangible book value determined as of the acquisition date less $2.0 million. The net fair value of the assets acquired exceeded the fair value of the cash consideration transferred as of the acquisition date and the Company correspondingly recorded a bargain purchase gain of $5.4 million for the three and six months ended March 31, 2019, which is presented within ‘other gain’ in the condensed consolidated income statements. The Company believes the transaction resulted in a bargain purchase gain due to the Company’s ability to incorporate these business activities into its existing business structure, and its ability to utilize certain deferred tax assets, including net operating loss carryforwards, and other assets while operating the business that may not have been likely to be realized by the seller nor was contemplated in the purchase price.

The legal name of GMP was changed to INTL FCStone Credit Trading, LLC (“IFT”) subsequent to the closing date. The post-acquisition results of IFT have been included in the Company’s condensed consolidated income statements for the three and six months ended March 31, 2019. The Company recorded net operating revenues and a net loss of $2.3 million and $0.9 million, respectively, that is attributable to IFT in the condensed consolidated income statements for the three and six months ended March 31, 2019. The acquired businesses have been included within the Company’s Securities reportable segment.

The following represents a preliminary allocation of the purchase price to the fair value of identifiable assets acquired and liabilities assumed as of the acquisition date:



(in millions)	Fair Value
Cash and cash equivalents	$	1.1
Deposits with and receivables from broker-dealers, clearing organizations, and counterparties ⁽¹⁾	7.7
Financial instruments owned, at fair value ⁽²⁾	7.1
Deferred income taxes, net	2.7
Property and equipment, net	0.7
Other assets	0.7
Total fair value of assets acquired	20.0

Accounts payable and other accrued liabilities	1.9
Payable to broker-dealers, clearing organizations, and counterparties	0.1
Financial instruments sold, not yet purchased, at fair value ⁽²⁾	4.4
Total fair value of liabilities assumed	6.4
Net fair value of assets acquired	13.6
Purchase price	8.2
Bargain purchase gain	$	5.4

⁽¹⁾Amount represents the contractual amount of deposits and receivables due from the clearing organization for trading activity, all of which the Company expects to be collectible as of the date of acquisition.

⁽²⁾Financial instruments owned and sold, not yet purchased, at fair value primarily includes equity securities and high yield, convertible and emerging market fixed income securities. Equity securities have been included within Level 1 of the fair value hierarchy and fixed income securities have been included in Level 2 of the fair value hierarchy as disclosed in Note 4.

Akshay Financeware, Inc.

On February 13, 2019, the Company paid $0.2 million to purchase the remaining interest of a joint venture originally acquired in connection with the acquisition of INTL Technology Services, LLC (formerly PayCommerce Financial Solutions, LLC) in September 2018. As a result of this transaction, the Company recorded $2.7 million of indefinite life intangibles for Society for Worldwide Interbank Financial Telecommunications (“SWIFT”) licenses held by the joint venture.

Note 1618 – Segment Analysis

The Company reports its operating segments based on services provided to ~~customers.~~clients. The Company’s business activities are managed as operating segments and organized into reportable segments as follows:

Commercial Hedging (includes components Financial Agricultural (Ag) & Energy and LME Metals)

Global Payments

Securities (includes components Equity ~~Market-Making,~~Capital Markets, Debt ~~Trading, Investment Banking,~~Capital Markets and Asset Management)

Physical Commodities (includes components Precious Metals and Physical Ag & Energy)

Clearing and Execution Services (includes components Exchange-traded Futures & Options, FX Prime Brokerage, Correspondent Clearing, Independent Wealth Management, and Derivative Voice Brokerage)

The total revenues reported combine gross revenues for the physical commodities business for subsidiaries that are not broker-dealers and net revenues for all other businesses. In order to reflect the way that the Company’s management views the results, the table below also reflects the segment contribution to ‘operating revenues’, which is shown on the face of the condensed consolidated income statements and which is calculated by deducting physical commodities cost of sales from total revenues.

Segment data includes the profitability measure of net contribution by segment. Net contribution is one of the key measures used by management to assess the performance of each segment and for decisions regarding the allocation of the Company’s resources. Net contribution is calculated as revenue less direct cost of sales, transaction-based clearing expenses, variable compensation, introducing broker commissions, and interest expense. Variable compensation paid to risk management

consultants/traders generally represents a fixed percentage of revenues generated, and in some cases, revenues generated less transaction-based clearing charges, base salaries and an overhead allocation.

Segment data also includes segment income which is calculated as net contribution less non-variable direct expenses of the segment. These non-variable direct expenses include trader base compensation and benefits, operational employee compensation and benefits, communication and data services, business development, professional fees, bad debt expense and other direct expenses.

Inter-segment revenues, charges, receivables and payables are eliminated upon consolidation, except revenues and costs related to foreign currency transactions undertaken on an arm’s length basis by the foreign exchange trading business for the securities business. The foreign exchange trading business competes for this business as it does any other business. If its rates are not competitive, the securities businesses buy or sell their foreign currency through other market counterparties.

On a recurring basis, the Company sweeps excess cash from certain U.S. operating segments to a centralized corporate treasury function in exchange for an intercompany receivable asset. The intercompany receivable asset is eliminated during consolidation, and therefore this practice may impact reported total assets between segments.

Information for the reportable segments is shown in accordance with the Segment Reporting Topic of the ASC as follows


	Three Months Ended June 30,					Nine Months Ended June 30,						Three Months Ended March 31,						Six Months Ended March 31,
(in millions)	2018		2017			2018			2017			2019			2018			2019			2018
Total revenues:
Commercial Hedging	$	77.9	$	57.1		$	217.7		$	177.3		$	80.6		$	78.3		$	140.4		$	139.8
Global Payments	26.0		22.5			74.0			67.1			27.4			23.4			57.1			48.0
Securities	49.9		40.0			148.4			115.3			72.6			55.5			141.6			98.5
Physical Commodities	6,873.4		5,320.3			20,852.3			16,495.2			6,940.9			6,262.3			13,242.7			13,978.9
Clearing and Execution Services	88.9		65.4			249.1			193.2			73.6			88.0			168.8			160.2
Corporate unallocated	2.2		0.6			2.4			(7.0		)	(2.9		)	(0.5		)	(6.2		)	0.2
Total	$	7,118.3	$	5,505.9		$	21,543.9		$	17,041.1		$	7,192.2		$	6,507.0		$	13,744.4		$	14,425.6
Operating revenues (loss):
Commercial Hedging	$	77.9	$	57.1		$	217.7		$	177.3		$	80.6		$	78.3		$	140.4		$	139.8
Global Payments	26.0		22.5			74.0			67.1			27.4			23.4			57.1			48.0
Securities	49.9		40.0			148.4			115.3			72.6			55.5			141.6			98.5
Physical Commodities	14.9		12.0			41.0			33.0			19.8			15.5			34.1			26.1
Clearing and Execution Services	88.9		65.4			249.1			193.2			73.6			88.0			168.8			160.2
Corporate unallocated	2.2		0.6			2.4			(7.0		)	(2.9		)	(0.5		)	(6.2		)	0.2
Total	$	259.8	$	197.6		$	732.6		$	578.9		$	271.1		$	260.2		$	535.8		$	472.8
Net operating revenues (loss):
Commercial Hedging	$	61.0	$	44.2		$	172.0		$	140.3		$	65.8		$	61.9		$	111.1		$	111.0
Global Payments	24.7		20.3			69.6			60.0			25.8			21.9			54.2			44.9
Securities	23.6		24.6			74.7			73.8			32.0			27.6			64.1			51.1
Physical Commodities	11.4		10.2			32.3			27.3			15.1			12.5			25.5			20.9
Clearing and Execution Services	32.7		25.6			91.9			75.1			31.0			31.8			68.5			59.2
Corporate unallocated	1.2		(1.6		)	(1.3		)	(15.0		)	(4.5		)	(1.4		)	(9.2		)	(2.5		)
Total	$	154.6	$	123.3		$	439.2		$	361.5		$	165.2		$	154.3		$	314.2		$	284.6
Net contribution:
(Revenues less cost of sales of physical commodities, transaction-based clearing expenses, variable compensation, introducing broker commissions and interest expense)	(Revenues less cost of sales of physical commodities, transaction-based clearing expenses, variable compensation, introducing broker commissions and interest expense)											(Revenues less cost of sales of physical commodities, transaction-based clearing expenses, variable compensation, introducing broker commissions and interest expense)
Commercial Hedging	$	44.3	$	32.6		$	125.5		$	102.9		$	49.3		$	44.7		$	79.9		$	81.2
Global Payments	19.9		16.2			55.9			47.9			21.0			17.6			44.1			36.0
Securities	17.5		20.2			55.6			58.9			20.1			20.3			41.9			38.1
Physical Commodities	8.1		7.6			23.1			19.9			11.5			9.4			18.6			15.0
Clearing and Execution Services	24.4		19.1			68.8			56.7			23.4			23.9			53.1			44.4
Total	$	114.2	$	95.7		$	328.9		$	286.3		$	125.3		$	115.9		$	237.6		$	214.7
Segment income:
(Net contribution less non-variable direct segment costs)
Commercial Hedging	$	25.3	$	16.3		$	74.0		$	50.4		$	30.2		$	27.6		$	43.5		$	48.7
Global Payments	16.0		12.9			44.1			37.8			15.8			13.5			34.4			28.1
Securities	10.3		12.9			34.1			37.5			11.8			12.8			27.8			23.8
Physical Commodities	5.1		4.3			11.8			11.2			7.8			5.6			13.7			6.7
Clearing and Execution Services	13.7		6.5			36.9			20.1			11.6			12.7			29.3			23.2
Total	$	70.4	$	52.9		$	200.9		$	157.0		$	77.2		$	72.2		$	148.7		$	130.5
Reconciliation of segment income to income before tax:	Reconciliation of segment income to income before tax:											Reconciliation of segment income to income before tax:
Segment income	$	70.4	$	52.9		$	200.9		$	157.0		$	77.2		$	72.2		$	148.7		$	130.5
Net costs not allocated to operating segments	39.5		37.9			121.9			119.3			51.7			42.7			98.8			82.4
Other gain	2.0		—			2.0			—			5.4			—			5.4			—
Income before tax	$	32.9	$	15.0		$	81.0		$	37.7		$	30.9		$	29.5		$	55.3		$	48.1

(in millions)	As of June 30, 2018		As of September 30, 2017									As of March 31, 2019			As of September 30, 2018
Total assets:
Commercial Hedging	$	1,848.5	$	1,650.3								$	1,704.7		$	1,935.7
Global Payments	284.3		199.5									234.4			206.6
Securities	2,712.7		2,101.7									5,150.0			3,058.2
Physical Commodities	307.4		339.5									406.2			413.7
Clearing and Execution Services	2,026.3		1,818.9									1,773.1			2,109.9
Corporate unallocated	105.7		133.5									139.3			100.6
Total	$	7,284.9	$	6,243.4								$	9,407.7		$	7,824.7

Note 17 - ~~Acquisitions~~

19 – Subsequent Events

On ~~June 12, 2018,~~March 13, 2019, the ~~Company~~Company’s subsidiary INTL FCStone (Netherlands) B.V. executed a sale and purchase agreement to acquire ~~Carl Kliem S.A. Carl Kliem S.A. is an independent interdealer broker based in Luxembourg, a~~all of the outstanding shares of CoinInvest GmbH and European Precious Metal Trading GmbH. This transaction was effective on the closing date of April 1, 2019 (“closing date”). Through the websites coininvest.com and silver-to-go.com, CoinInvest GmbH and European Precious Metal Trading GmbH are leading European ~~financial hub, which provides foreign exchange, interest rate~~online providers of gold, silver, platinum, and ~~fixed income~~palladium products to ~~a diverse,~~private individuals, institutional ~~client base across~~investors, and financial advisors. The addition of CoinInvest GmbH and European Precious Metal Trading GmbH to the ~~European Union. Carl Kliem S.A. employs~~Company’s global product suite expands its offering, providing clients the ability to purchase physical gold and other precious metals, in multiple forms, and in denominations of their choice, to add to their investment portfolios. On the closing date, the Company paid preliminary cash consideration for the acquisition of €19.4 million, or approximately 40 people and has over 400 active institutional clients. The closing of the agreement is conditional upon approval of the Luxembourg financial sector supervisory authority, the Commission de Surveillance du Secteur Financier. The purchase price$21.8 million, which is equal to the estimated net tangible book value of the acquired entities as of December 31, 2018 (“effective date”), plus a premium of €6.5 million and €10.0 million for the purchase of shareholders loans outstanding with the acquired entities. The preliminary purchase price is subject to adjustment based upon the final purchase price calculations, as defined in the agreement, including an adjustment for the profits or losses generated by the acquired entities from the effective date to the closing date. The preliminary allocation of the purchase price is not yet complete.

On March 19, 2019, the Company’s subsidiary INTL FCStone Pte Ltd executed an asset purchase agreement to acquire the futures and options brokerage and clearing business of UOB Bullion and Futures Limited, a subsidiary of United Overseas Bank Limited. Closing is conditional upon receiving regulatory approval by the Monetary Authority of Singapore (“MAS”). The addition of the Asian-focused futures and options brokerage and clearing business to the INTL FCStone group gives the Company critical mass in its regional capabilities, providing access to a solid and reputable client base, and enhances the Company’s global product offering out of Singapore. The purchase price for the acquired assets is $5.0 million of which $2.5 million was due upon the execution of the asset purchase agreement and is included in ‘Other assets’ on the ~~completion date minus restructuring costs and~~condensed consolidated balance sheet as of March 31, 2019. The remaining $2.5 million is ~~not~~due to the seller upon closing of the acquisition, which is expected to ~~be material to~~occur during the ~~Company.~~

2019 calendar year upon receiving approval from the MAS.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Throughout this document, unless the context otherwise requires, the terms “Company”, “we”, “us” and “our” refer to INTL FCStone Inc. and its consolidated subsidiaries. INTL FCStone Inc. is a Delaware corporation.

The following discussion and analysis should be read in conjunction with the financial statements and notes thereto appearing elsewhere in this report. This Quarterly Report on Form 10-Q contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These forward-looking statements involve known and unknown risks and uncertainties, many of which are beyond the control of INTL FCStone Inc. and its subsidiaries, including adverse changes in economic, political and market conditions, losses from our market-making and trading activities arising from counter-party failures and changes in market conditions, the possible loss of key personnel, the impact of increasing competition, the impact of changes in government regulation, the possibility of liabilities arising from violations of foreign, federal and state securities laws and the impact of changes in technology in the securities and commodities trading industries. Although we believe that our forward-looking statements are based upon reasonable assumptions regarding our business and future market conditions, there can be no assurances that our actual results will not differ materially from any results expressed or implied by our forward-looking statements. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. We caution readers that any forward-looking statements are not guarantees of future performance.

Overview

~~INTL FCStone Inc. is~~We are a diversified global brokerage and financial services ~~organization~~firm providing execution, risk management and advisory services, market intelligence and clearing services ~~across~~with significant asset ~~classes~~class coverage and ~~markets around the world.~~significant market coverage globally. We help our ~~customers~~clients to access market liquidity, maximize profits and manage risk.

~~We are a leader in the development of specialized financial services in commodities, securities, global payments, foreign exchange and other markets.~~ Our revenues are derived primarily from financial products and advisory services intended to fulfill our ~~customers’ real~~clients’ commercial needs and provide bottom-line benefits to their businesses. ~~We work to create added value for~~Our businesses are supported by our ~~customers by providing access to~~ global ~~financial markets using~~infrastructure of regulated operating subsidiaries, our ~~industry~~advanced technology platform and ~~financial expertise, deep partner and network relationships, insight and guidance, and integrity and transparency.~~ our team of more than 1,800 employees as of March 31, 2019. We believe our ~~customer-first~~client-first approach differentiates us from large banking institutions, engenders trust, and has enabled us to establish leadership positions in a number of complex fields in financial markets around the world.

We report our operating segments based on services provided to clients. Our ~~leadership~~business activities are managed as operating segments and organized into five reportable segments, including Commercial Hedging and Physical Commodities, which are commercial client focused; Clearing & Execution Services (“CES”) and Securities, which are institutional client focused; and Global Payments. See Segment Information for a listing of our operating segment components.

Recent Events Affecting the Company

During the week ended November 16, 2018, balances in approximately 300 accounts of the FCM division of our wholly owned subsidiary, INTL FCStone Financial, declined below required maintenance margin levels, primarily as a result of significant and unexpected price fluctuations in the natural gas markets. All positions ~~span markets such~~in these accounts, which were managed by OptionSellers.com Inc. (“OptionSellers”), an independent Commodity Trading Advisor (“CTA”), were liquidated in accordance with the INTL FCStone Financial’s client agreements and obligations under market regulation standards.

A CTA is registered with the CFTC and a member of, and subject to audit by, the NFA. OptionSellers is registered under a CFTC Rule 4.7 exemption for “qualified eligible persons,” which requires the account holders authorizing OptionSellers to act as ~~commodity risk management advisory services; global payments; market-making~~their CTA to meet or exceed certain minimum financial requirements. OptionSellers, in ~~international equities~~its role as a CTA, had been granted by each of its clients full discretionary authority to manage the trading in the client accounts, while INTL FCStone Financial acted solely as the clearing firm in its role as the FCM.

INTL FCStone Financial’s client agreements hold account holders liable for all losses in their accounts and obligate the account holders to reimburse INTL FCStone Financial for any account deficits in their accounts. As of March 31, 2019, the aggregate receivable from these client accounts, net of collections and other ~~securities; fixed income; correspondent securities clearing~~allowable deductions, was $29.4 million, with no individual account receivable exceeding $1.4 million. INTL FCStone Financial continues to pursue collection of these receivables and ~~independent wealth management; physical~~intends both to enforce and to defend its rights aggressively, and to claim interest and costs of collection where applicable.

We have been named in arbitrations brought by clients seeking damages relating to the trading losses in these accounts. We believe that such cases are without merit and ~~hedging~~intend to defend them vigorously. At the same time, we have initiated numerous arbitration proceedings against clients to recover deficit balances in their accounts. We believe we have a valid claim against our clients, based on the express language of ~~precious metals~~the customer contracts and ~~select other commodities; execution~~legal precedent, and intend to pursue collection of ~~listed futures~~these claims vigorously.

We have done an assessment of the collectability of these accounts, considered the status of arbitration proceedings, and ~~options~~have concluded that we do not have a sufficient basis to record an allowance against these uncollected balances. As we move through the collection and arbitration processes and additional information becomes available, we will continue to consider the need for an allowance against the carrying value of these uncollected balances. Depending on ~~futures contracts on all major commodity exchanges~~future collections and ~~foreign currency trading, among others. These businesses are supported by~~arbitration proceedings, any provisions for bad debts and actual losses ultimately may or may not be material to our global infrastructure of regulated operating subsidiaries, advanced technology platform and team of more than 1,600 employees. We currently serve more than 20,000 predominantly wholesale organizations, located in more than 130 countries. Our correspondent clearing and independent wealth management businesses include approximately 50 correspondent clearing relationships with more than 120,000 underlying individual securities accounts, of which 65,000 arefinancial results. Currently, we do not believe that any potential losses related to ~~the independent wealth management business.~~

Our customers include producers, processors and end-users of nearly all widely traded physical commodities; commercial counterparties who are end-users of our products and services; governmental and non-governmental organizations; and commercial banks, asset managers, introducing broker-dealers, insurance companies, brokers, institutional investors and major investment banks. We believe our customers value us for our focus on their needs, our expertise and flexibility, our global reach,this matter would impact our ability to ~~provide access to hard-to-reach markets~~comply with our ongoing liquidity, capital, and ~~opportunities, and our status as a well-capitalized and regulatory-compliant organization.~~

We believe we are well positioned to capitalize on key trends impacting the financial services sector. Among others, these trends include the impact of increased regulation on banking institutions and other financial services providers; increased

consolidation, especially of smaller sub-scale financial services providers and independent securities clearing firms; the growing importance and complexity of conducting secure cross-border transactions; and the demand among financial institutions to transact with well-capitalized counterparties.

~~We focus on mitigating exposure to market risk, ensuring adequate liquidity to maintain daily operations and making non-interest expenses variable, to the greatest extent possible.~~regulatory requirements.

Effects of the Tax Cuts and Jobs Act

On December 22, 2017, the President of the United States (“U.S.”) signed and enacted into law H.R. 1, the Tax Cuts and Jobs Act (“the Tax Reform”). Among the significant changes to the U.S. Internal Revenue Code, the Tax Reform ~~lowers~~lowered the U.S. federal corporate income tax rate from 35% to 21%, effective January 1, 2018. We will compute our income tax expense (benefit) for the September 30, ~~2018~~2019 tax year using a U.S. statutory tax rate of ~~24.5%~~21%. ~~The 21%~~We computed income tax expense for the year ended September 30, 2018 using a U.S. statutory tax rate ~~will apply~~of 24.5%. See Note 16 of the Condensed Consolidated Financial Statements for additional information.

For the three and six months ended March 31, 2018, we recorded tax (benefit) expense of ($0.1) million and $8.8 million, respectively, related to ~~fiscal years ending September 30, 2019~~the remeasurement of deferred tax assets and ~~thereafter.~~liabilities based on the information available. The Tax Reform also ~~imposes~~included a one-time mandatory repatriation transition tax on previously untaxed accumulated and current ~~earnings and profits (“~~E~~&P”)~~&P of certain of ~~the Company’s~~our foreign subsidiaries.

~~Our accounting for certain elements of the Tax Reform is incomplete. However, as of June 30, 2018, we can determine~~We made a reasonable estimate ~~for certain effects~~ of the ~~Tax Reform~~transition tax, and ~~have~~for the three and six months ended March 31, 2018, we recorded ~~an estimate as~~ a provisional ~~amount.~~transition tax obligation of ($0.7) million and $11.3, respectively. The ~~provisional~~accounting for the remeasurement of the deferred tax assets and liabilities, resulted in $8.8 million of discrete tax expense, which increased the effective tax rate by 11% during the nine months ended June 30, 2018. The provisional remeasurement amount is expected to change as data becomes available allowing more accurate scheduling of the deferred tax assets and liabilities.

~~To determine the amount of the transition tax, we must determine, in addition to other factors, the amount of post 1986 E&P of the relevant subsidiaries,~~ as well as the ~~amount of non-US income taxes paid on such earnings. We can make a reasonable estimate of~~accounting for the transition tax and recorded a provisional transition tax obligation of $11.3 million, which increased the effective tax rate by 14% during the nine months ended June 30, 2018. We continue to gather additional information to more precisely compute the amount of the transition tax.

~~While we can make reasonable estimates of the impact of the reduction in corporate rate and the deemed~~one-time mandatory repatriation transition tax ~~the final impact~~on previously untaxed accumulated and current E&P of certain of the Tax Reform may differ from these estimates, due to, among other things, changes in our interpretations and assumptions, additional guidance that may be issued by taxing authorities, and actions we may take.

The Tax Reform also establishes new tax laws that will affect the fiscal year ending September 30, 2019, including, but not limited to, (1) elimination of the corporate alternative minimum tax, (2) a new provision designed to tax global intangible low-taxed income (GILTI), (3) limitations on the utilization of net operating losses generated after December 31, 2017 to 80 percent of taxable income per tax year, (4) the creation of the base erosion anti-abuse tax (BEAT), (5) a general elimination of U.S. federal income taxes on dividends fromCompany’s foreign subsidiaries ~~and (6) limitations on the deductibility of certain executive compensation.~~is complete.

Executive Summary

~~We achieved another strong performance in~~In the ~~third~~second quarter of fiscal ~~2018, with~~2019, our operating revenues ~~of $259.8~~were $271.1 million, ~~representing 31% growth over~~as we added $10.9 million, or 4%, compared to the prior year. ~~Continued market volatility in~~With the exception of our ~~key markets resulted in increased customer activity~~Clearing and ~~a widening of spreads, which combined with increases in short term interest rates and average customer balances resulted in growth in operating revenues across~~Execution Services segment, all of our operating segments ~~including record quarterly~~increased operating revenues ~~in both our Global Payments and Clearing and Execution Services segments (“CES”).~~as compared to the prior year.

The growth in operating revenues was led by our ~~CES~~Securities segment which ~~increased $23.5~~added $17.1 million versus the prior year. Physical Commodities and Global Payments added operating revenues of $4.3 million and $4.0 million, respectively, while Commercial Hedging added $2.3 million versus the prior year. Clearing and Execution Services operating revenues declined $14.4 million versus the prior year, ~~while our largest~~however it recorded declines in both transaction-based clearing expenses and introducing broker commissions which tempered the effect on segment ~~Commercial Hedging added $20.8 million in~~income of the operating revenues versus the prior year. The Securities segment added $9.9 million while the Global Payments and Physical Commodities segments increased operating revenues by $3.5 million and $2.9 million, respectively.revenue declines.

Overall, segment income increased ~~33%~~7%, or ~~$17.5~~$5.0 million ~~with~~to $77.2 million in the second quarter. Commercial Hedging ~~and CES segments adding $9.0 million and $7.2 million respectively. In addition, Global Payments~~ segment income increased ~~$3.1~~9%, primarily as a result of a $2.2 million ~~versus the prior year period. Our Physical Commodities increased segment~~increase in interest income as growth in OTC revenues were partially offset by ~~$0.8~~a decline in exchange-traded revenues. In addition, variable expenses excluding interest expense declined $2.1 million versus the prior year. These ~~gains~~increases were ~~partially~~ offset by a ~~$2.6 million decline in segment income in our Securities segment versus the prior year.~~

~~Commercial Hedging segment income increased 55%, primarily as a result of strong growth in both exchange-traded and OTC revenues as well as a $3.4~~$2.0 million increase in ~~interest income. Non-variable~~non-variable direct expenses ~~increased $2.7 million, primarily impacted by~~including a ~~$2.5~~$0.8 million increase in bad debt ~~expense related to two customers in our agricultural commodities OTC business.~~

CES segment income increased 111%, primarily as a result of the increase in operating revenues, most notably a 77% increase in our Exchange-traded Futures & Options business, driven by a 55% increase in exchange-traded volumes as well as a $4.9 million increase in interest income. In addition, cost savings initiatives in our FX Prime Brokerage and Correspondent Clearing businesses resulted in a $1.9 million decline in non-variable direct expenses.

expense.

Global Payments segment income increased ~~24%~~17%, primarily as a result of the increase in operating revenues, driven by a ~~18%~~6% increase in the number of payments made, an 8% increase in the average revenue per ~~trade~~payment versus the prior year ~~period. In addition,~~period and a decline in introducing broker ~~commissions declined $0.8 million, which~~commissions. This growth was partially offset by a ~~$0.6~~$1.1 million increase in non-variable direct expenses.

~~Segment~~Securities segment income declined 8%, as growth in Equity Capital Markets operating revenues was offset by an increase in interest expense related to our securities lending activities as well as an increase in compensation and benefits related to the launch of our prime brokerage initiative. In addition, the increase in Debt Capital Markets operating revenues was mostly offset by higher interest expense in our domestic institutional business and a decline in performance in our Argentina operations.

Physical Commodities segment income increased ~~19%,~~$2.2 million to $7.8 million in the second quarter versus the prior year. This was primarily driven by the increase in operating revenues as well as a $0.3 million decline in non-variable direct expenses. While operating revenues in our Securities segment increased 25%, segment income declined $2.6 million. This decline was the result of a $4.3 million increase in ~~transaction-based clearing expenses and~~operating revenues, which was tempered by a ~~$7.8~~$1.6 million increase in interest expense ~~due to the effect of an~~and a $0.5 million increase in ~~short term interest rates on our institutional fixed~~variable compensation.

CES segment income ~~business and an increase in our securities lending activities. In addition,~~declined 9%, or $1.1 million versus the prior year ~~period includes~~as profitability in our Exchange-traded Futures & Options and Derivative Voice Brokerage businesses declined $1.0 million and $0.5 million, respectively.

In the second quarter of fiscal 2019, we completed our acquisition of GMP Securities LLC and recognized a ~~$2.5 million realized~~pre-tax bargain purchase gain on the ~~sale of exchange shares~~transaction. This gain was tempered by a $1.2 million pre-tax loss for the second quarter in ~~Argentina.~~the acquired business.

On the expense side, we continue to focus on maintaining our variable cost model and limiting the growth of our non-variable expenses. To that end, variable expenses were ~~63%~~57% of total expenses in the current period compared to ~~57%~~63% in the prior year period. Non-variable expenses increased ~~4%,~~$9.7 million, or ~~$2.9 million~~12%, year-over-year, primarily ~~as a result~~driven by our acquisitions of ~~a $1.5 million increase in bad debt expense~~Carl Kliem S.A., PayCommerce Financial Solutions, LLC and GMP Securities LLC as well as ~~a $1.1 million increase in professional fees.~~

~~The third quarter results include $2.6 million in operating revenues, presented in ‘trading gains, net’, related to economic hedges in place against~~ the effect of the devaluation of the Argentina peso on our Argentine operations. The Argentine peso has historically served as our functional currency in the Argentine operations, and as such the revaluation of the net assetslaunch of our ~~Argentine subsidiaries is~~securities prime brokerage initiative.

For the second quarter of fiscal 2019, we recorded ~~as a component~~net income of accumulated other comprehensive loss, net in the condensed consolidated balance sheets. Recently, the Argentinian economy was determined to be highly inflationary and as such, beginning July 1, 2018, the functional currency for our Argentine subsidiaries will change to the U.S. dollar and prospectively the corresponding revaluations of the net assets of these subsidiaries will be recorded in earnings each quarter in the condensed consolidated income statements while the highly inflationary designation continues.

~~Finally, the third quarter results include a gain of $2.0~~$23.4 million ~~related to a judgment received in final settlement of our claim in the Sentinel Management Group Inc. bankruptcy proceeding. Please see~~ ~~Note 11 - Commitments and Contingencies~~ ~~for additional information on the Sentinel litigation.~~

~~Net income nearly doubled, to a record $24.0 million in the third quarter,~~ compared to ~~$12.7~~$22.7 million in the prior ~~year.~~year period.

Selected Summary Financial Information

Results of Operations

Total revenues reported combine gross revenues for the physical commodities business and net revenues for all other businesses. In order to reflect the way that we view the results, the table below reflects the calculation of the subtotal ‘operating revenues’, which is calculated by deducting physical commodities cost of sales from total revenues. ~~Below~~Set forth below is aour discussion of the results of our operations, as viewed by management, for the three and ~~nine~~six month periods ended ~~June 30, 2018~~March 31, 2019 and ~~2017.~~2018.

Financial Information (Unaudited)


	Three Months Ended June 30,						Nine Months Ended June 30,						Three Months Ended March 31,						Six Months Ended March 31,
(in millions)	2018		% Change		2017		2018		% Change		2017		2019		% Change		2018		2019			% Change		2018
Revenues:
Sales of physical commodities	$	6,866.2	29	%	$	5,317.0	$	20,836.4	26	%	$	16,486.3	$	6,929.5	11	%	$	6,255.8	$	13,225.3		(5	)%	$	13,970.2
Trading gains, net	103.4		29	%	79.9		296.9		20	%	246.9
Principal gains, net													110.3		12	%	98.5		203.1			16	%	175.6
Commission and clearing fees	96.6		32	%	73.0		271.6		28	%	212.5		85.1		(20	)%	106.4		184.6			(4	)%	192.9
Consulting, management, and account fees	18.3		12	%	16.3		53.2		12	%	47.5		19.1		4	%	18.4		38.2			9	%	35.0
Interest income	33.7		72	%	19.6		85.6		79	%	47.7		48.2		73	%	27.9		93.2			80	%	51.9
Other income	0.1		—		0.1		0.2		—	%	0.2
Total revenues	7,118.3		29	%	5,505.9		21,543.9		26	%	17,041.1		7,192.2		11	%	6,507.0		13,744.4			(5	)%	14,425.6
Cost of sales of physical commodities	6,858.5		29	%	5,308.3		20,811.3		26	%	16,462.2		6,921.1		11	%	6,246.8		13,208.6			(5	)%	13,952.8
Operating revenues	259.8		31	%	197.6		732.6		27	%	578.9		271.1		4	%	260.2		535.8			13	%	472.8
Transaction-based clearing expenses	49.0		45	%	33.9		136.6		35	%	101.2		42.7		(16	)%	50.7		92.8			6	%	87.6
Introducing broker commissions	34.1		17	%	29.2		101.4		18	%	86.1		24.8		(31	)%	36.2		57.4			(15	)%	67.3
Interest expense	22.1		97	%	11.2		55.4		84	%	30.1		38.4		102	%	19.0		71.4			114	%	33.3
Net operating revenues	154.6		25	%	123.3		439.2		21	%	361.5		165.2		7	%	154.3		314.2			10	%	284.6
Compensation and benefits	86.9		15	%	75.5		252.3		13	%	222.7		97.9		11	%	88.2		187.0			13	%	165.4
Bad debts	1.6		1,500	%	0.1		2.9		(26	)%	3.9		0.7		250	%	0.2		1.0			233	%	0.3
(Recovery) bad debt on physical coal													—		n/m		—		(2.4		)	(340	)%	1.0
Other expenses	35.2		8	%	32.7		105.0		8	%	97.2		41.1		13	%	36.4		78.7			13	%	69.8
Total compensation and other expenses	123.7		14	%	108.3		360.2		11	%	323.8		139.7		12	%	124.8		264.3			12	%	236.5
Other gain	2.0		nm		—		2.0		nm		—		5.4		n/m		—		5.4			n/m		—
Income before tax	32.9		119	%	15.0		81.0		115	%	37.7		30.9		5	%	29.5		55.3			15	%	48.1
Income tax expense	8.9		287	%	2.3		41.2		435	%	7.7		7.5		10	%	6.8		13.7			(58	)%	32.3
Net income	$	24.0	89	%	$	12.7	$	39.8	33	%	$	30.0	$	23.4	3	%	$	22.7	$	41.6		163	%	$	15.8

Balance Sheet information:							June 30, 2018		% Change		June 30, 2017								March 31, 2019			% Change		March 31, 2018
Total assets							$	7,284.9	18	%	$	6,195.9							$	9,407.7		31	%	$	7,203.7
Payables to lenders under loans							$	360.6	47	%	$	244.7							$	256.8		(25	)%	$	340.5
Senior secured tern loan, net																			$	171.8		n/m		$	—
Stockholders’ equity							$	487.7	4	%	$	469.1							$	551.8		18	%	$	466.6

The selected data table below reflects key operating metrics used by management in evaluating our product lines, for the periods indicated:


	Three Months Ended June 30,						Nine Months Ended June 30,						Three Months Ended March 31,						Six Months Ended March 31,
	2018		% Change		2017		2018		% Change		2017		2019		% Change		2018		2019		% Change		2018
Volumes and Other Data:
Exchange-traded - futures and options (contracts, 000’s)	35,632.6		47	%	24,190.3		98,190.8		33	%	73,763.0		29,060.3		(21	)%	36,696.1		66,587.4		6	%	62,558.2
OTC (contracts, 000’s)	427.4		12	%	382.8		1,165.7		13	%	1,035.5		383.5		(7	)%	410.4		792.8		7	%	738.3
Global Payments (# of payments, 000’s)	171.9		(2	)%	175.8		481.1		1	%	476.1		162.8		6	%	153.0		329.4		6	%	309.3
Gold equivalent ounces traded (000’s)	72,300.6		98	%	36,553.6		160,802.8		82	%	88,122.2		77,721.1		41	%	54,999.0		172,940.7		95	%	88,502.1
Equity Market-Making (gross dollar volume, millions)	$	30,344.1	42	%	$	21,298.1	$	87,088.6	29	%	$	67,284.8
Debt Trading (gross dollar volume, millions)	$	29,922.2	(7	)%	$	32,176.4	$	91,615.0	(11	)%	$	102,651.2
Equity Capital Markets (gross dollar volume, millions)													$	37,238.8	16	%	$	32,010.2	$	80,547.5	42	%	$	56,744.5
Debt Capital Markets (gross dollar volume, millions)													$	58,230.1	105	%	$	28,459.1	$	118,907.3	93	%	$	61,692.8
FX Prime Brokerage volume (U.S. notional, millions)	$	93,007.8	(36	)%	$	145,679.8	$	330,178.9	(32	)%	$	487,145.5	$	80,435.6	(35	)%	$	122,869.0	$	170,380.3	(28	)%	$	237,171.0
Average assets under management in Argentina (U.S. dollar, millions)	$	458.4	(30	)%	$	653.4	$	467.3	(18	)%	$	570.7	$	347.3	(26	)%	$	469.8	$	315.0	(33	)%	$	471.7
Average customer equity - futures and options (millions)	$	2,244.0	16	%	$	1,938.7	$	2,146.9	7	%	$	2,010.8
Average client equity - futures and options (millions)													$	1,936.6	(6	)%	$	2,070.9	$	2,134.6	2	%	$	2,098.4

Operating Revenues

Three Months Ended ~~June 30, 2018~~March 31, 2019 Compared to Three Months Ended ~~June 30, 2017~~March 31, 2018

Operating revenues increased ~~31%~~4% to ~~$259.8~~a record $271.1 million in the ~~third~~second quarter compared to ~~$197.6~~$260.2 million in the prior year. All operating segments recorded growth in operating revenues, ~~led by our~~with the exception of the Clearing and Execution Services ~~and Commercial Hedging segments,~~segment which ~~increased $23.5~~declined $14.4 million ~~and $20.8 million, respectively. In addition,~~versus the prior year. The growth in operating revenues was led by our Securities segment ~~added$9.9~~which added $17.1 million versus the prior year, while our Physical Commodities added $4.3 million. The Global Payments and ~~Physical Commodities~~Commercial Hedging segments added ~~$3.5~~operating revenues of $4.0 million and ~~$2.9~~$2.3 million, ~~respectively.~~respectively, versus the prior year.

Operating revenues in our Securities segment increased 31% to $72.6 million in the second quarter compared to the prior year. The Equity Capital Markets business added $8.4 million, as the gross dollar volume traded increased 16% as a result of an increase in market volatility, market share and increased securities lending activities. Operating revenues in our Debt Capital Markets business increased $9.4 million versus the prior year, driven by an increase in interest income within our domestic institutional dealer in fixed income securities and to a lesser extent the acquisition of GMP Securities LLC. These increases were partially offset by lower revenues in our Argentinian due to difficult market conditions in that country. Asset Management operating revenues declined $0.7 million compared to the prior year period as a result of a 26% decline in average assets under management.

Our Physical Commodity segment operating revenues increased 28% to $19.8 million. This increase was driven by a $3.0 million increase in Precious Metals operating revenues as well as a $1.3 million increase in Physical Ag & Energy operating revenues, both of which resulted from increased client activity.

Operating revenues in our Global Payments segment increased 17% in the second quarter to a $27.4 million, as a result of a 6% increase in the number of global payments and an 8% increase in the average revenue per trade compared to the prior year period.

Operating revenues in Commercial Hedging increased 3% compared to the prior year to $80.6 million as a result of a $2.8 million increase in OTC revenues and a $2.2 million increase in interest income, which were partially offset by a $2.2 million decline in exchange-traded revenues. Exchange-traded volumes and OTC volumes declined 13% and 7%, respectively, and the average client equity increased 3% to $918.3 million.

Operating revenues in our CES segment ~~increased 36%~~decreased 16% to ~~a record $88.9~~$73.6 million in the ~~third~~second quarter, primarily as a result of ~~77% growth~~29% decline in ~~Exchange-traded~~Exchange-Traded Futures & Options revenues to ~~$50.8~~$35.3 million, driven by ~~increases~~decreases in contract volumes and the average rate per ~~contract earned and~~contract. However, these declines were partially offset by a ~~$4.9~~$3.4 million increase in interest income. Our Correspondent Clearing business added ~~$1.7~~$1.6 million in operating revenues, compared to the prior year, to $8.4 million as a result of a $1.8 million increase in interest and fee income related to client assets under administration. Our Independent Wealth Management business declined $0.9 million versus the prior year, while ~~the~~our Derivative Voice Brokerage and FX Prime Brokerage ~~added $0.6 million. These gains were modestly offset by~~businesses decreased $0.6 million and ~~$0.3~~$0.2 million, ~~declines in our Independent Wealth Management and Derivative Voice Brokerage businesses,~~ respectively.

~~Operating revenues~~

Interest income increased $20.3 million, or 73%, to $48.2 million in ~~Commercial Hedging increased 36%,~~the second quarter compared to $27.9 million in the prior year ~~to $77.9 million~~, as a result of ~~a $9.3 million increase~~the effect of increases in ~~OTC revenues, a $7.8 million increase in exchange-traded revenues and a $3.4 million increase in~~short term interest ~~income. OTC revenues increased as a result of a 12% increase in customer OTC volumes~~rates as well as ~~a 39% increase~~increases in ~~the average rate per contract, primarily driven by increased customer activity~~volumes in ~~Brazil~~our Debt Capital Markets and ~~overall market volatility. Exchange-traded revenues increased primarily as a result of a 23% increase in exchange-traded contract volume, most notably in the domestic grain markets.~~

~~Operating revenues~~securities lending activities. Interest income in our Securities segment increased ~~25% to $49.9~~$13.8 million in the ~~third~~second quarter compared to the prior year. The Equity Market-Making business increased 92%, to $24.8 million, as the gross dollar volume traded increased 42% as a result of increased market volatility, the on-boarding of new customers and increased market share. Operating revenues in our Debt Trading business declined 4%, to $22.1 million versus over the prior year, ~~as higher domestic revenues were more than offset by weaker revenues in our Argentina business driven by local economic conditions. In addition, the prior year period includes a $2.5~~of which $7.3 million ~~realized gain on the sale of exchange shares in Argentina. These same conditions drove a $0.6 million decline in Asset Management operating revenues~~was related to $2.7 million as average assets under management declined 30% driven by the decline in the Argentine Peso. Overall, the Securities segment operating revenues benefited from a $6.6 million increase in interest income, primarily inincreased trading activity within our domestic institutional dealer in fixed income securities and $6.7 million was related to an increase in securities lending activities.

~~Operating revenues~~ Average client equity in ~~our Global Payments segment increased 16% in~~ the ~~third quarter~~ ~~to a record $26.0 million, as the average revenue per trade increased 18% to $151.25 while the number of global payments declined modestly versus the prior year.~~

Our Physical Commodity segment operating revenues increased 24% to $14.9 million, as a result of a $1.1 million increase in Precious Metals operating revenues combined with a $1.8 million increase in our PhysicalFinancial Ag & Energy ~~business.~~

~~Interest income increased $14.1 million to $33.7 million in~~ ~~the third quarter~~ ~~compared to prior year, driven by an increase in short term rates as well as a 16% increase in average customer equity in the Exchange-traded~~and Exchange-Traded Futures & Options components of our Commercial Hedging and CES segments decreased 6% to ~~$2.2~~$1.9 billion in the ~~third~~second quarter compared to the prior year, ~~which resulted~~however the effect of increases in short-term interest rates drove an aggregate ~~$7.0~~$4.9 million increase in interest income in these businesses. In addition, our Securities segment added $6.6 million in interest income as a result of increases in our domestic fixed income and securities lending businesses and our correspondent clearing business added $2.2 million in interest income versus the prior year.

Finally, operating revenues for the third quarter include gains of $2.6 million related to economic hedges in place against the effect of the devaluation of the Argentina Peso on our Argentine operations.

See Segment Information below for additional information on activity in each of the segments.

~~Nine~~Six Months Ended ~~June 30, 2018~~March 31, 2019 Compared to ~~Nine~~Six Months Ended ~~June 30, 2017~~March 31, 2018

Operating revenues increased ~~27%~~13% to ~~$732.6~~$535.8 million in the current ~~nine~~six months ended compared to ~~$578.9~~$472.8 million in the prior year. All segments of our business achieved growth in operating revenues versus the prior year, with the largest growth coming in our ~~CES~~Securities segment which added ~~$55.9~~$43.1 million in operating ~~revenues. In addition, Commercial Hedging segment operating revenues increased $40.4 million, while operating revenues in our Securities segment added $33.1 million~~revenue versus the prior year. Our ~~Physical Commodities and~~ Global ~~Payment segments, grew $8.0 million and $6.9 million respectively.~~

Operating revenues for the prior year include a $5.8 million pre-tax unrealized loss on interest rate swaps and U.S. Treasury notes held as part of our interest rate management strategy, while the current nine months ended include no unrealized gain/losses on this program as all interest rate swaps and U.S. Treasury notes had been liquidated during fiscal 2017. On a segment basis, these unrealized losses are reported in the Corporate unallocated segment, while the amortized earnings on these investments are included in the Commercial Hedging and CES segments.

~~Operating revenues in our CES~~Payments segment increased ~~29% to $249.1 million in the current nine months ended, primarily as a result of 61% growth in Exchange-traded Futures & Options~~operating revenues to $136.3 million, driven by increases in contract volumes, the average rate per contract earned and a $7.6 million, or 135% increase in interest income. Our Derivative Voice Brokerage business added $1.6$9.1 million versus the prior year, while ~~the Correspondent Clearing~~our CES segment added $8.6 million. Finally, our Physical Commodities and ~~Independent Wealth Management businesses added $1.2~~Commercial Hedging segments grew operating revenues by $8.0 million and ~~$0.9~~$0.6 million, ~~in operating revenues, respectively compared to the prior year. In addition the FX Prime Brokerage business, added $0.5 million in operating revenues versus the prior year.~~

Operating revenues in Commercial Hedging increased 23% in the current nine months ended to $217.7 million, as exchange-traded revenues increased $11.7 million and OTC revenues increased $21.0 million. Customer exchange-traded volumes increased 18%, driven by increased activity from customers in the domestic grain and energy and renewable fuels markets as well as an increase in exchange-traded revenues from omnibus relationships introduced by our commercial hedging employees. OTC revenues increased as a result of both a 13% increase in OTC volumes and a 25% increase in the average rate per contract compared to the prior year. These increases were driven by increased activity from Brazil agricultural customers as well as increased activity in food service, dairy and cotton markets.respectively.

Operating revenues in our Securities segment increased ~~29%~~44% to ~~$148.4~~$141.6 million in the current ~~nine~~six months ended compared to the prior year. The Equity ~~Market-Making~~Capital Markets business increased ~~61%~~62%, to ~~$70.8~~$74.4 million, as the gross dollar volume traded increased ~~29%~~42% as a result of increased market volatility ~~the on-boarding of new customers~~ and ~~increased~~ market ~~share.~~share as well as growth in our securities lending activities. Operating revenues in our Debt ~~Trading~~Capital Markets business increased ~~13%~~33%, to ~~$68.4~~$63.4 million versus the prior year, ~~with increases in activity in our municipal securities business as well as~~driven by an increase in interest income in our domestic institutional fixed income business and to a lesser extent the acquisition of GMP Securities LLC. These increases were partially offset by lower operating revenues in ~~Argentina. The prior year period includes a $2.5 million realized gain on the sale of exchange shares in Argentina.~~our Argentina operations. Asset Management operating revenues declined ~~16%~~21%, to ~~$7.5~~$3.8 million in the current ~~nine~~six months ended, as the average assets under management declined ~~18%~~33%. Overall, the Securities segment operating revenues benefited from a ~~$17.8~~$25.8 million increase in interest income, primarily in our domestic institutional fixed income and securities lending activities.

Operating revenues in our Global Payments segment increased 19% in the current six months ended to $57.1 million, as a result of a 6% increase in the number of global payments made as well as a 10% increase in the average revenue per trade.

Operating revenues in our CES segment increased 5% to $168.8 million in the current six months ended. Exchange-traded Futures & Options operating revenues were relatively flat compared to the prior year at $85.7 million, with contract volume growth of 9% and a $7.2 million, or 96% increase in interest income being offset by a 16% decline in the average rate per contract. In addition the FX Prime Brokerage business, added $2.6 million in operating revenues versus the prior year. The increase in FX Prime Brokerage operating revenues was primarily driven by a $2.7 million settlement received related to the Barclays PLC ‘last look’ class action matter. Our Derivative Voice Brokerage business added $1.1 million versus the prior year, while the Correspondent Clearing and Independent Wealth Management businesses added $3.9 million and $0.8 million in operating revenues, respectively compared to the prior year.

Our Physical ~~Commodity~~Commodities segment operating revenues increased ~~24%~~31% to ~~$41.0~~$34.1 million in the current ~~nine~~six months ended, primarily as a result of a ~~$4.1~~$5.4 million increase in Precious Metals operating revenues as well as a ~~$3.9~~$2.6 million increase in Physical Ag & Energy operating revenues driven by increased ~~customer~~client activity.

Operating revenues in ~~our Global Payments segment increased 10%~~Commercial Hedging were relatively flat with the prior year at $140.4 million in the current ~~nine~~six months ended, ~~to $74.0~~with a $5.0 million asdecline in OTC revenues being offset by a ~~result of a 1%~~$5.7 million increase in interest income, while exchange-traded revenues were flat with the ~~number of global payments made as well as~~prior year. Exchange-traded volumes decreased 3%, however this was offset by a ~~9% increase~~3% expansion in the average ~~revenue~~rate per ~~trade.~~contract. OTC revenues declined despite a 7% increase in OTC volumes as they were negatively affected by marked-to-market declines, which we believe in part are temporary in nature, related to certain longer tenor positions which are directionally hedged but suffered declines in value during the current six months ended.

Interest income increased ~~$37.9~~$41.3 million to ~~$85.6~~$93.2 million in the current ~~nine~~six months ended compared to prior year as a result of the effect of increases in short term interest rates and to a lesser extent average ~~customer~~client equity as well as the ~~$17.8~~$25.8 million increase in interest income in the Securities segment discussed above. ~~Included in interest income, the prior year period includes a $4.8 million unrealized loss on U.S. Treasury notes held as part of our interest rate management strategy.~~ Average ~~customer~~client equity in the ~~Exchange-traded~~Financial Ag & Energy and Exchange-Traded Futures & Options components of our Commercial Hedging and CES segments increased 7%2% to $2.1 billion

in the current ~~nine~~six months ended, which combined with the increases in short-term interest rates resulted in an aggregate ~~$14.0~~$12.2 million increase in interest income in these businesses.

Finally, operating revenues for the current nine months ended include gains of $3.1 million related to economic hedges in place against the effect of the devaluation of the Argentina Peso on our Argentine operations.

See Segment Information below for additional information on activity in each of the segments.

Interest and Transactional Expenses

Three Months Ended ~~June 30, 2018~~March 31, 2019 Compared to Three Months Ended ~~June 30, 2017~~March 31, 2018

Transaction-based clearing expenses: Transaction-based clearing expenses decreased 16% to $42.7 million in the second quarter compared to $50.7 million in the prior year, and were 16% of operating revenues in the second quarter compared to 19% in the prior year. The decrease in expense is primarily related to lower volumes in our Exchange-Traded Futures & Options and Financial Ag & Energy components, and a decrease in transaction taxes in our Equity Capital Markets component.

Introducing broker commissions: Introducing broker commissions decreased 31% to $24.8 million in the second quarter compared to $36.2 million in the prior year, and were 9% of operating revenues in the second quarter compared to 14% in the prior year. The decrease in expense is primarily due to decreased activity in our Exchange-Traded Futures & Options, Argentinian Debt Capital Markets business and Independent Wealth Management components.

Interest expense: Interest expense increased $19.4 million, or 102%, to $38.4 million in the second quarter compared to $19.0 million in the prior year. During the second quarter and the prior year, interest expense directly attributable to trading activities, including interest on short-term financing facilities of subsidiaries, was $35.2 million and $16.5 million, respectively, and interest expense related to corporate funding purposes was $3.2 million and $2.5 million, respectively.

During the second quarter, interest expense directly attributable to trading activities includes $17.5 million in connection with trading activities conducted as an institutional dealer in fixed income securities, and $9.8 million in connection with securities lending activities. During the prior year, interest expense directly attributable to trading activities included $9.0 million in connection with trading activities conducted as an institutional dealer in fixed income securities, and $3.6 million in connection with securities lending activities.

Six Months Ended March 31, 2019 Compared to Six Months Ended March 31, 2018

Transaction-based clearing expenses: Transaction-based clearing expenses increased ~~45%~~6% to ~~$49.0 million in~~ ~~the third quarter~~ ~~compared to $33.9 million in~~ ~~the prior year, and were 19% of operating revenues in~~ ~~the third quarter~~ ~~compared to 17% in~~ ~~the prior year. The increase in expense is related to higher volumes in our Financial Ag & Energy, Exchange-traded Futures & Options and Equity Market-Making components.~~

~~Introducing broker commissions:~~ ~~Introducing broker commissions increased 17% to $34.1 million in~~ ~~the third quarter~~ ~~compared to $29.2 million in~~ ~~the prior year, and were 13% of operating revenues in~~ ~~the third quarter~~ ~~compared to 15% in~~ ~~the prior year~~. The percentage of operating revenue is inversely impacted by the growth in interest income. The increase in expense is primarily due to increased business activity and improved performance in our Exchange-traded Futures & Options and Financial Ag & Energy components, partially offset by lower costs in Debt Trading and Global Payments.

~~Interest expense:~~ ~~Interest expense~~ ~~increased 97% to~~ ~~$22.1 million~~ in ~~the third quarter~~ ~~compared to~~ ~~$11.2 million~~ in ~~the prior year. The~~ ~~increase~~ in expense is primarily related to the trading activities of our institutional dealer in fixed income securities, which resulted in higher interest expense of $3.8 million, and the increased activity of our securities lending business, started up during fiscal 2017 in our Equity Market-Making component, which resulted in higher interest expense of $3.5 million. Also, an increase in short-term rates resulted in higher costs in our Exchange-traded Futures & Options component. Additionally, higher short-term rates along with higher average borrowings outstanding on our physical commodity financing facility resulted in increased expense.

~~Nine Months Ended June 30, 2018 Compared to Nine Months Ended June 30, 2017~~

~~Transaction-based clearing expenses:~~ ~~Transaction-based clearing expenses increased 35% to $136.6~~$92.8 million in the current ~~nine~~six months ended compared to ~~$101.2~~$87.6 million in the prior year, and were ~~19%~~17% of operating revenues in the current ~~nine~~six months ended compared to ~~17%~~19% in the prior year. The increase in expense is primarily related to an increase in ADR conversion fees, partially offset by lower transaction taxes in our Equity Capital Markets component. Additionally, higher volumes in our ~~Financial Ag & Energy,~~ Exchange-Traded Futures & Options ~~and Equity Market-Making components, partially offset by lower costs~~component resulted in ~~our LME Metals, FX Prime Brokerage and Correspondent Clearing components.~~higher expenses.

Introducing broker commissions: Introducing broker commissions ~~increased 18%~~decreased 15% to ~~$101.4~~$57.4 million in the current ~~nine~~six months ended compared to ~~$86.1~~$67.3 million in the prior year, and were ~~14%~~11% of operating revenues in the current ~~nine~~six months ended compared to ~~15%~~14% in the prior year. The ~~increase~~decrease in expense is primarily due to ~~increased business~~decreased activity ~~and improved performance~~ in our ~~Exchange-traded~~Exchange-Traded Futures & Options component and ~~Financial Ag & Energy components, partially offset by~~ lower costs in ~~Global Payments and Equity Market-Making.~~our Argentinian Debt Capital Markets business.

Interest expense: Interest expense increased ~~84%~~$38.1 million, or 114%, to ~~$55.4~~$71.4 million in the current ~~nine~~six months ended compared to ~~$30.1~~$33.3 million in the prior year. ~~The increase in~~During the current six months ended and the prior year, interest expense ~~is primarily~~directly attributable to trading activities, including interest on short-term financing facilities of subsidiaries, was $65.4 million and $28.6 million, respectively, and interest expense related to corporate funding purposes was $6.0 million and $4.7 million, respectively.

During the current six months ended, interest expense directly attributable to trading activities ~~of our~~includes $34.8 million in connection with trading activities conducted as an institutional dealer in fixed income securities, ~~which resulted~~and $14.5 million in ~~higher~~connection with securities lending activities. During the prior year, interest expense ~~of $11.5~~directly attributable to trading activities included $16.2 million in connection with trading activities conducted as an institutional dealer in fixed income securities, and ~~the increased activity of our~~$5.1 million in connection with securities lending business, started up during fiscal 2017 in our Equity Market-Making component, which resulted in higher interest expense of $8.4 million. Also, an increase in short-term rates resulted in higher costs in our Exchange-traded Futures & Options and Financial Ag & Energy components. Additionally, higher short-term rates along with higher average borrowings outstanding on our physical commodity financing facility resulted in increased expense.activities.

Net Operating Revenues

Net operating revenues is one of the key measures used by management to assess the performance of our operating segments. Net operating revenue is calculated as operating revenue less transaction-based clearing expenses, introducing broker commissions and interest expense. Transaction-based clearing expenses represent variable expenses paid to executing brokers, exchanges, clearing organizations and banks in relation to our transactional volumes. Introducing broker commissions include commission paid to non-employee third parties that have introduced ~~customers~~clients to us. Net operating revenues represent revenues available to pay variable compensation to risk management consultants and traders and direct non-variable expenses, as well as variable and non-variable expenses of operational and administrative employees, including our executive management team.

Three Months Ended ~~June 30, 2018~~March 31, 2019 Compared to Three Months Ended ~~June 30, 2017~~

March 31, 2018

Net operating revenues increased ~~$31.3 million, or 25%,~~7% to ~~$154.6~~$165.2 million in the ~~third~~second quarter compared to ~~$123.3~~$154.3 million in the prior year.

~~Nine~~

Six Months Ended ~~June 30, 2018~~March 31, 2019 Compared to ~~Nine~~Six Months Ended ~~June 30, 2017~~March 31, 2018

Net operating revenues increased ~~$77.7 million, or 21%,~~10% to ~~$439.2~~$314.2 million in the current ~~nine~~six months ended compared to ~~$361.5~~$284.6 million in the prior year.

Compensation and Other Expenses

The following table shows a summary of expenses, other than interest and transactional expenses.


	Three Months Ended June 30,						Nine Months Ended June 30,						Three Months Ended March 31,						Six Months Ended March 31,
(in millions)	2018		% Change		2017		2018		% Change		2017		2019		% Change		2018		2019			% Change		2018
Compensation and benefits:
Fixed compensation and benefits	$	40.4	(3	)%	$	41.5	$	122.7	4	%	$	118.0	$	46.5	11	%	$	42.0	$	87.9		7	%	$	82.3
Variable compensation and benefits	46.5		37	%	34.0		129.6		24	%	104.7		51.4		11	%	46.2		99.1			19	%	83.1
	86.9		15	%	75.5		252.3		13	%	222.7		97.9		11	%	88.2		187.0			13	%	165.4
Other non-compensation expenses:
Trading systems and market information	8.6		4	%	8.3		25.7		—	%	25.7		9.5		7	%	8.9		18.7			9	%	17.1
Occupancy and equipment rental	4.2		8	%	3.9		12.5		13	%	11.1		5.0		19	%	4.2		9.4			13	%	8.3
Professional fees	4.8		30	%	3.7		13.4		13	%	11.9		5.0		28	%	3.9		10.3			20	%	8.6
Travel and business development	3.7		23	%	3.0		10.2		6	%	9.6		4.0		33	%	3.0		7.8			20	%	6.5
Non-trading technology and support	3.8		19	%	3.2		10.3		16	%	8.9		5.0		47	%	3.4		9.2			42	%	6.5
Depreciation and amortization	2.8		17	%	2.4		8.4		17	%	7.2		3.2		10	%	2.9		6.1			9	%	5.6
Communications	1.3		(13	)%	1.5		4.1		5	%	3.9		2.0		43	%	1.4		3.3			18	%	2.8
Bad debts	1.6		n/m		0.1		2.9		(26	)%	3.9		0.7		n/m		0.2		1.0			233	%	0.3
(Recovery) bad debt on physical coal													—		—	%	—		(2.4		)	n/m		1.0
Other expense	6.0		(10	)%	6.7		20.4		8	%	18.9		7.4		(15	)%	8.7		13.9			(3	)%	14.4
	36.8		12	%	32.8		107.9		7	%	101.1		41.8		14	%	36.6		77.3			9	%	71.1
Total compensation and other expenses	$	123.7	14	%	$	108.3	$	360.2	11	%	$	323.8	$	139.7	12	%	$	124.8	$	264.3		12	%	$	236.5

Three Months Ended ~~June 30, 2018~~March 31, 2019 Compared to Three Months Ended ~~June 30, 2017~~March 31, 2018

Compensation and Other Expenses: Compensation and other expenses ~~increase~~d ~~$15.4~~increased $14.9 million,, or ~~14%~~12%, to ~~$123.7~~$139.7 million in the ~~third~~second quarter compared to ~~$108.3~~$124.8 million in the prior year.

Compensation and Benefits: Total compensation and benefits expense ~~increased 15%~~increased 11% to ~~$86.9~~$97.9 million in the ~~third~~second quarter compared to ~~$75.5~~$88.2 million in the prior year. Total compensation and benefits were ~~33%~~36% of operating revenues in the ~~third~~second quarter compared to ~~38%~~34% in the prior year. The variable portion of compensation and benefits ~~increase~~dincreased by ~~37%~~11% to ~~$46.5~~$51.4 million in the ~~third~~second quarter compared to ~~$34.0~~$46.2 million in the prior year. Variable compensation and benefits were ~~30%~~31% of net operating revenues in the second quarter compared to 30% in the ~~third quarter~~prior year ~~compared to 28% in the prior year.~~. Administrative, centralized operations and executive incentive compensation was ~~$7.3~~$7.0 million in the ~~third~~second quarter compared to ~~$4.8~~$6.4 million in the prior year, primarily due to ~~increased incentive accruals based on higher current year performance.~~an increase in administrative headcount.

The fixed portion of compensation and benefits ~~decrease~~d 3%increased 11% to ~~$40.4~~$46.5 million in the ~~third~~second quarter compared to ~~$41.5~~$42.0 million in the prior year. Non-variable salaries increased ~~$0.3~~$2.8 million, or 1%10%, primarily ~~across operations and administrative areas.~~due to our recent acquisitions, which added $1.6 million in the second quarter. Employee benefits, excluding share-based compensation, increased ~~$0.4~~$1.5 million in the ~~third~~second quarter, primarily related to higher ~~accruals for executive management related to a cash based-long-term incentive plan.~~payroll and healthcare costs from the increased headcount. Share-based compensation is a component of the fixed portion, and includes stock option and restricted stock expense. Share-based compensation was ~~$1.7~~$1.9 million in the ~~third~~second quarter compared to ~~$2.0~~$1.6 million in the prior year. The number of employees ~~increased 3%~~increased 5% to ~~1,646~~1,851 at the end of the ~~third~~second quarter compared to ~~1,599~~1,763 at the beginning of the ~~third~~second quarter. The number of employees at the end of the prior year period was ~~1,609~~.1,599.

Other Non-Compensation Expenses: Other non-compensation expenses increased ~~12%~~14% to ~~$36.8~~$41.8 million in the ~~third~~second quarter compared to ~~$32.8~~$36.6 million in the prior year. Occupancy and equipment rental increased $0.8 million, primarily related in incremental costs due to recent acquisitions. Professional fees increased ~~30%~~$1.1 million, primarily related to higher legal ~~fees,~~fees. Non-trading technology and ~~higher consulting fees primarily related to administrative system evaluations. Depreciation and amortization~~support increased $1.6 million, primarily due to ~~depreciation of the new trading system for certain over-the-counter commodities business activities placed~~higher software support and maintenance costs related to various IT and client engagement systems. Communications expenses increased $0.6 million, primarily related in ~~service during the fourth quarter of 2017.~~incremental costs due to recent acquisitions.

Bad debts increased ~~$1.5~~$0.5 million over the prior year. During the ~~third~~second quarter, bad debt expense ~~net~~ was ~~$1.6~~$0.7 million and primarily related to ~~$2.3 million of OTC~~ customer deficits ~~partially offset by~~in the ~~recovery of a precious metals customer account deficit. During the prior year, bad debt expense was $0.1 million.~~

Financial Ag & Energy component.

Provision for Taxes: The effective income tax rate was ~~27%~~24% in the ~~third~~second quarter compared to ~~15%~~23% in the prior year. ~~There were no discrete adjustments related to the Tax Act recorded in~~For the three months ended ~~June 30, 2018. The~~March 31, 2019, the effective ~~tax~~ rate decreased 0.2% due to excess tax benefits of share-based compensation recognized during the period related to the adoption of ASU 2016-09. The effective income tax rate during the prior year was lower than the U.S. federal statutory rate primarily due to a higher mix of earnings taxed at lower rates in foreign jurisdictions. The effective tax rate during the third quarter of fiscal year 2018 was higher than the U.S. federal statutory rate ~~primarily~~of 21% due to U.S. state

and local taxes, GILTI, and US and foreign permanent differences. The estimated GILTI tax expense increased the effective rate approximately 1%. The effective rate for the three months ended March 31, 2018 was 25.8%, excluding the impacts of Tax Reform, and was higher than the blended statutory rate of 24.5% due to U.S. state and local taxes and foreign permanent differences. For the three months ended March 31, 2018, the Company recorded discrete benefit of $0.8 million related to Tax Reform, which decreased the effective tax rate by 2.8%. Further, the Company’s effective tax rate decreased 0.6% and 0.3% for the three months ended March 31, 2019 and 2018, respectively, due to excess tax benefits on share-based compensation recognized due to the adoption of Accounting Standards Update (“ASU”) 2016-09.

~~Nine~~Six Months Ended ~~June 30, 2018~~March 31, 2019 Compared to ~~Nine~~Six Months Ended ~~June 30, 2017~~March 31, 2018

Compensation and Other Expenses: Compensation and other expenses increased ~~$36.4~~$27.8 million, or ~~11%~~12%, to ~~$360.2~~$264.3 million in the current ~~nine~~six months ended compared to ~~$323.8~~$236.5 million in the prior year.

Compensation and Benefits: Total compensation and benefits expense increased 13% to ~~$252.3~~$187.0 million in the current ~~nine~~six months ended compared to ~~$222.7~~$165.4 million in the prior year. Total compensation and benefits were ~~34%~~35% of operating revenues in the current ~~nine~~six months ended compared to ~~38%~~35% in the prior year. The variable portion of compensation and benefits increased ~~24%~~19% to ~~$129.6~~$99.1 million in the current ~~nine~~six months ended compared to ~~$104.7~~$83.1 million in the prior year. Variable compensation and benefits were ~~30%~~32% of net operating revenues in the current ~~nine~~six months ended compared to 29% in the prior year. Administrative, centralized operations and executive incentive compensation was ~~$18.0~~$13.3 million in the current ~~nine~~six months ended compared to ~~$14.5~~$10.7 million in the prior year, primarily due to increased incentive accruals based on increased headcount and higher current year performance.

The fixed portion of compensation and benefits increased 4%7% to ~~$122.7~~$87.9 million in the current ~~nine~~six months ended compared to ~~$118.0~~$82.3 million in the prior year. Non-variable salaries increased ~~$2.3~~$3.9 million, or 3%7%, primarily ~~across operations and administrative areas. Contract labor costs increased $1.0 million.~~due to our recent acquisitions, which added $2.1 million in the current six months ended. Employee benefits, excluding share-based compensation, increased ~~$2.2~~$2.5 million in the current ~~nine~~six months ended, primarily related to higher ~~accruals for executive management related to a cash based-long-term incentive plan.~~payroll and healthcare costs from the increased headcount. Share-based compensation is a component of the fixed portion, and includes stock option and restricted stock expense. Share-based compensation was ~~$4.9~~$3.8 million in the current ~~nine~~six months ended compared to ~~$4.6~~$3.2 million in the prior year. The number of employees was ~~1,646~~1,851 at the end of the second quarter compared to ~~1,607~~1,701 at the beginning of the current fiscal year. The number of employees at the end of the prior year period was ~~1,609.~~1,599.

Other Non-Compensation Expenses: Other non-compensation expenses increased 7%9% to ~~$107.9~~$77.3 million in the current ~~nine~~six months ended compared to ~~$101.1~~$71.1 million in the prior year. ~~Bad debts decreased $1.0 million over the prior year. During the current nine months ended, bad debt expense, net was $2.9~~Professional fees increased $1.7 million, primarily related to ~~$2.3~~higher legal fees. Non-trading technology and support increased $2.7 million, primarily due to higher support and maintenance costs related to various IT and client engagement systems.

During the current six months ended, we reached settlements with clients, paying $8.4 million related to demurrage, dead freight, and other penalty charges regarding coal supplied during fiscal 2017. The settlement amount paid was less than the accrued liability for the transactions recorded during fiscal 2017 and fiscal 2018, and accordingly we recorded a recovery on the bad debt on physical coal of ~~OTC customer deficits and~~$2.4 million in the quarter ended December 31, 2018. During the prior year period, we recorded additional bad debt expense of $1.0 million related to reimbursement due the Company from a coal supplier following our recorded charge of $47.0 million during the fourth quarter of fiscal 2017. ~~During the prior year, bad debt~~The expense ~~was $3.9 million, primarily~~ related to ~~LME Metals customer deficits in our Commercial Hedging segment.~~reimbursement for demurrage and other charges related to contracts with delivery dates during the first quarter of fiscal 2018.

Provision for Taxes: The effective income tax rate was ~~51%~~25% in the current ~~nine~~six months ended compared to ~~20%~~67% in the prior year. The effective rate for the current six months ended was higher than the U.S. federal statutory rate of 21% due to U.S. state and local taxes, GILTI, and US and foreign permanent differences. The estimated GILTI tax expense increased the effective rate approximately 1%. The effective rate for the six months ended March 31, 2018 was 25%, excluding the impacts of Tax Reform, and was higher than the blended statutory rate of 24.5% due to U.S. state and local taxes and foreign permanent differences. For the six months ended March 31, 2018, the Company recorded discrete expense of $20.1 million related to ~~the~~ Tax Reform, which increased the effective tax rate by ~~25%~~42%. ~~The effective rate for~~Further, the ~~current nine months ended was 26%, excluding the impacts of the Tax Reform. The~~Company’s effective tax rate decreased ~~0.4%~~0.1% and 0.6% for the six months ended March 31, 2019 and 2018, respectively, due to excess tax benefits on share-based compensation recognized ~~during the period related~~due to the adoption of ~~ASU~~Accounting Standards Update (“ASU”) 2016-09. Our effective income tax rate during the prior year was lower than the U.S. federal statutory rate primarily due to a higher mix of earnings taxed at lower rates in foreign jurisdictions. The effective income tax rate in the current nine months is higher than the U.S. federal statutory rate because of the impacts of the Tax Reform.

Unallocated Costs and Expenses

The following table is a breakout of our unallocated costs and expenses from the total costs and expenses shown above. The unallocated costs and expenses include certain shared services such as information technology, accounting and treasury, credit and risk, legal and compliance, and human resources and other activities.


	Three Months Ended June 30,						Nine Months Ended June 30,						Three Months Ended March 31,						Six Months Ended March 31,
(in millions)	2018		% Change		2017		2018		% Change		2017		2019		% Change		2018		2019		% Change		2018
Compensation and benefits:
Fixed compensation and benefits	$	15.6	(5	)%	$	16.4	$	47.8	8	%	$	44.4	$	18.5	18	%	$	15.7	$	35.6	11	%	$	32.2
Variable compensation and benefits	6.6		57	%	4.2		16.3		25	%	13.0		6.4		8	%	5.9		12.0		24	%	9.7
	22.2		8	%	20.6		64.1		12	%	57.4		24.9		15	%	21.6		47.6		14	%	41.9
Other non-compensation expenses:
Trading systems and market information	0.8		33	%	0.6		2.1		11	%	1.9		0.3		(57	)%	0.7		0.7		(46	)%	1.3
Occupancy and equipment rental	4.2		8	%	3.9		12.4		13	%	11.0		4.9		20	%	4.1		9.3		13	%	8.2
Professional fees	2.9		38	%	2.1		8.0		13	%	7.1		3.5		52	%	2.3		6.8		33	%	5.1
Travel and business development	0.9		29	%	0.7		2.4		—	%	2.4		1.0		43	%	0.7		2.1		40	%	1.5
Non-trading technology and support	3.0		20	%	2.5		8.2		24	%	6.6		3.9		44	%	2.7		6.9		33	%	5.2
Depreciation and amortization	2.3		15	%	2.0		6.7		12	%	6.0		2.6		18	%	2.2		4.9		11	%	4.4
Communications	1.1		(15	)%	1.3		3.7		6	%	3.5		2.0		54	%	1.3		3.2		23	%	2.6
Other expense	3.3		27	%	2.6		13.0		55	%	8.4		4.5		(21	)%	5.7		8.1		(16	)%	9.7
	18.5		18	%	15.7		56.5		20	%	46.9		22.7		15	%	19.7		42.0		11	%	38.0
Total compensation and other expenses	$	40.7	12	%	$	36.3	$	120.6	16	%	$	104.3	$	47.6	15	%	$	41.3	$	89.6	12	%	$	79.9

Total unallocated costs and other expenses increased ~~$4.4~~$6.3 million to ~~$40.7~~$47.6 million in the ~~third~~second quarter compared to ~~$36.3~~$41.3 million in the prior year. Compensation and benefits increased ~~$1.6~~$3.3 million, or 8%15% to ~~$22.2~~$24.9 million in the ~~third~~second quarter compared to ~~$20.6~~$21.6 million in the prior year.

Total unallocated costs and other expenses increased ~~$16.3~~$9.7 million to ~~$120.6~~$89.6 million in the current ~~nine~~six months ended compared to ~~$104.3~~$79.9 million in the prior year. Compensation and benefits increased ~~$6.7~~$5.7 million, or ~~12%~~14% to ~~$64.1~~$47.6 million in the current ~~nine~~six months ended compared to ~~$57.4~~$41.9 million in the prior year.

During the current three and ~~nine~~six months ended, the increase in fixed compensation and benefits and variable compensation and benefits is primarily related to ~~accruals for executive management for incentives based on current year performance, as well as a cash based-long-term incentive plan. The increase in other expense is primarily~~headcount increases across several administrative departments. Additionally, non-trading technology and support increased due to higher support and maintenance costs related to ~~our internal bi-annual global sales meeting held during January 2018.~~various IT and client engagement systems.

Variable vs. Fixed Expenses


	Three Months Ended June 30,								Nine Months Ended June 30,								Three Months Ended March 31,								Six Months Ended March 31,
(in millions)	2018		% of Total		2017		% of Total		2018		% of Total		2017		% of Total		2019		% of Total		2018		% of Total		2019			% of Total		2018		% of Total
Variable compensation and benefits	$	46.5	22	%	$	34.0	20	%	$	129.6	22	%	$	104.7	20	%	$	51.4	25	%	$	46.2	22	%	$	99.1		24	%	$	83.1	21	%
Transaction-based clearing expenses	49.0		24	%	33.9		20	%	136.6		23	%	101.2		20	%	42.7		21	%	50.7		24	%	92.8			22	%	87.6		22	%
Introducing broker commissions	34.1		17	%	29.2		17	%	101.4		16	%	86.1		17	%	24.8		11	%	36.2		17	%	57.4			14	%	67.3		18	%
Total variable expenses	129.6		63	%	97.1		57	%	367.6		61	%	292.0		57	%	118.9		57	%	133.1		63	%	249.3			60	%	238.0		61	%
Fixed compensation and benefits	40.4		20	%	41.5		24	%	122.7		21	%	118.0		23	%	46.5		22	%	42.0		20	%	87.9			21	%	82.3		21	%
Other fixed expenses	35.2		17	%	32.7		19	%	105.0		18	%	97.2		19	%	41.1		21	%	36.4		17	%	78.7			20	%	69.8		18	%
Bad debts	1.6		—	%	0.1		—	%	2.9		—	%	3.9		1	%	0.7		—	%	0.2		—	%	1.0			—	%	0.3		—	%
(Recovery) bad debt on physical coal																	—		—	%	—		—	%	(2.4		)	(1	)%	1.0		—	%
Total non-variable expenses	77.2		37	%	74.3		43	%	230.6		39	%	219.1		43	%	88.3		43	%	78.6		37	%	165.2			40	%	153.4		39	%
Total non-interest expenses	$	206.8	100	%	$	171.4	100	%	$	598.2	100	%	$	511.1	100	%	$	207.2	100	%	$	211.7	100	%	$	414.5		100	%	$	391.4	100	%

We seek to make our non-interest expenses variable to the greatest extent possible, and to keep our fixed costs as low as possible. The table above shows an analysis of our variable expenses and non-variable expenses as a percentage of total non-interest expenses for the three and ~~nine~~six months ended ~~June 30,~~March 31, 2019 and 2018, ~~and 2017,~~ respectively.

Our variable expenses include variable compensation paid to traders and risk management consultants, bonuses paid to operational, administrative, and executive employees, transaction-based clearing expenses and introducing broker

commissions. As a percentage of total non-interest expenses, variable expenses were ~~63%~~57% in the ~~third~~second quarter compared to ~~57%~~

63% in the prior ~~year~~.year. As a percentage of total non-interest expenses, variable expenses were ~~61%~~60% in the current ~~nine~~six months ended compared to ~~57%~~61% in the prior year.

Segment Information

Our business activities are managed as operating segments and organized into reportable segments as follows:

INTL FCStone Inc.

Commercial Hedging

Global Payments

Securities

Physical Commodities

Clearing and Execution Services (“CES”)

Components:

Component:

Components:

- Financial Ag

& Energy

- Global Payments

- Equity ~~Market-~~Capital

~~Making~~Markets

- Precious Metals

- Exchange-traded
Futures & Options

- LME Metals

- Debt ~~Trading~~Capital
Markets

- Physical Ag

& Energy

- FX Prime Brokerage

~~- Investment Banking~~

- Correspondent
Clearing

- Asset Management

- Independent
Wealth Management

- Derivative
Voice Brokerage

We report our operating segments based on services provided to ~~customers.~~clients. Net contribution is one of the key measures used by management to assess the performance of each segment and for decisions regarding the allocation of our resources. Net contribution is calculated as ~~revenue~~revenues less direct cost of sales, transaction-based clearing expenses, introducing broker commissions, interest expense and variable compensation. Variable compensation paid to risk management consultants and traders generally represents a fixed percentage of an amount equal to revenues generated, and in some cases, revenues generated less transaction-based clearing expenses and related charges, base salaries and an overhead allocation.

Segment income is calculated as net contribution less non-variable direct expenses of the segment. These non-variable direct expenses include trader base compensation and benefits, operational charges, communication and data services, business development, professional fees, bad debt expense, trade errors and direct marketing expenses.

Total Segment Results

The following table shows summary information concerning all of our business segments combined.


	Three Months Ended June 30,						Nine Months Ended June 30,						Three Months Ended March 31,						Six Months Ended March 31,
(in millions)	2018		% of Operating Revenues	2017		% of Operating Revenues	2018		% of Operating Revenues	2017		% of Operating Revenues	2019		% of Operating Revenues	2018		% of Operating Revenues	2019			% of Operating Revenues	2018		% of Operating Revenues
Sales of physical commodities	$	6,866.2		$	5,317.0		$	20,836.4		$	16,486.3		$	6,929.5		$	6,255.8		$	13,225.3			$	13,970.2
Trading gains, net	99.5			79.1			289.8			246.1
Principal gains, net													110.8			97.4			204.5				172.4
Commission and clearing fees	96.9			73.0			271.7			212.2			85.5			106.3			185.2				192.7
Consulting, management, and account fees	17.8			15.9			51.7			46.6			18.3			17.8			37.0				33.9
Interest income	35.6			20.3			91.8			56.9			51.0			30.2			98.6				56.2
Other	0.1			—			0.1			—
Total revenues	7,116.1			5,505.3			21,541.5			17,048.1			7,195.1			6,507.5			13,750.6				14,425.4
Cost of sales of physical commodities	6,858.5			5,308.3			20,811.3			16,462.2			6,921.1			6,246.8			13,208.6				13,952.8
Operating revenues	257.6		100%	197.0		100%	730.2		100%	585.9		100%	274.0		100%	260.7		100%	542.0			100%	472.6		100%
Transaction-based clearing expenses	49.2		19%	33.5		17%	135.7		19%	99.6		17%	42.5		16%	50.2		19%	92.4			17%	86.5		18%
Introducing broker commissions	34.0		13%	29.1		15%	101.3		14%	86.0		15%	24.8		9%	36.2		14%	57.4			11%	67.3		14%
Interest expense	21.0		8%	9.5		5%	52.7		7%	23.8		4%	37.0		14%	18.6		7%	68.8			13%	31.7		7%
Net operating revenues	153.4			124.9			440.5			376.5			169.7			155.7			323.4				287.1
Variable direct compensation and benefits	39.2		15%	29.2		15%	111.6		15%	90.2		15%	44.4		16%	39.8		15%	85.8			16%	72.4		15%
Net contribution	114.2			95.7			328.9			286.3			125.3			115.9			237.6				214.7
Non-variable direct expenses	43.8		17%	42.8		22%	128.0		18%	129.3		22%
Fixed compensation and benefits													24.1			22.5			44.8				42.4
Other fixed expenses													23.3			20.9			45.5				40.4
Bad debts													0.7			0.3			1.0				0.4
(Recovery) bad debt on physical coal													—			—			(2.4		)		1.0
Total non-variable direct expenses													48.1		18%	43.7		17%	88.9			16%	84.2		18%
Segment income	$	70.4		$	52.9		$	200.9		$	157.0		$	77.2		$	72.2		$	148.7			$	130.5

Three Months Ended ~~June 30, 2018~~March 31, 2019 Compared to Three Months Ended ~~June 30, 2017~~March 31, 2018

Net contribution for all of our business segments increased ~~19%~~8% to ~~$114.2~~$125.3 million in the ~~third~~second quarter compared to ~~$95.7~~$115.9 million in the prior year. Segment income increased ~~33%~~7% to ~~$70.4~~$77.2 million in the ~~third~~second quarter compared to ~~$52.9~~$72.2 million in the prior year.

~~Nine~~Six Months Ended ~~June 30, 2018~~March 31, 2019 Compared to ~~Nine~~Six Months Ended ~~June 30, 2017~~March 31, 2018

Net contribution for all of our business segments increased ~~15%~~11% to ~~$328.9~~$237.6 million in the current ~~nine~~six months ended compared to ~~$286.3~~$214.7 million in the prior year. Segment income increased ~~28%~~14% to ~~$200.9~~$148.7 million in the current ~~nine~~six months ended compared to ~~$157.0~~$130.5 million in the prior year.

Commercial Hedging

We serve our commercial ~~customers~~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 ~~customers.~~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 ~~customer~~client objectives. Our ~~customers~~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 and interest rate swaps as well as a wide range of structured product solutions to our commercial ~~customers~~clients who are seeking cost-effective hedging strategies. Generally, our ~~customers~~clients direct their own

trading activity, and our risk management consultants do not have discretionary authority to transact trades on behalf of our ~~customers.~~

clients.

The following table provides the financial performance for Commercial Hedging for the periods indicated.


	Three Months Ended June 30,					Nine Months Ended June 30,					Three Months Ended March 31,						Six Months Ended March 31,
(in millions)	2018		% Change	2017		2018		% Change	2017		2019		% Change	2018			2019		% Change	2018
Revenues:
Sales of physical commodities	$	—	—	$	—	$	—	—	$	—	$	—	—	$	—		$	—	—	$	—
Trading gains, net	34.9		45%	24.0		101.5		25%	81.1
Principal gains, net											41.5		11%	37.3			62.1		(4)%	64.9
Commission and clearing fees	32.5		24%	26.3		88.6		16%	76.3		28.0		(12)%	31.8			55.5		(4)%	57.8
Consulting, management, and account fees	3.7		6%	3.5		11.5		6%	10.9		3.8		(7)%	4.1			7.8		—%	7.8
Interest income	6.7		103%	3.3		16.0		78%	9.0		7.3		43%	5.1			15.0		61%	9.3
Other	0.1		—%	—		0.1		—	—
Total revenues	77.9		36%	57.1		217.7		23%	177.3		80.6		3%	78.3			140.4		—%	139.8
Cost of sales of physical commodities	—		—	—		—		—	—		—		—	—			—		—	—
Operating revenues	77.9		36%	57.1		217.7		23%	177.3		80.6		3%	78.3			140.4		—%	139.8
Transaction-based clearing expenses	10.1		31%	7.7		27.8		27%	21.9		8.7		(12)%	9.9			17.8		1%	17.7
Introducing broker commissions	6.3		26%	5.0		16.5		12%	14.7		5.7		(3)%	5.9			10.7		5%	10.2
Interest expense	0.5		150%	0.2		1.4		250%	0.4		0.4		(33)%	0.6			0.8		(11)%	0.9
Net operating revenues	61.0		38%	44.2		172.0		23%	140.3		65.8		6%	61.9			111.1		—%	111.0
Variable direct compensation and benefits	16.7		44%	11.6		46.5		24%	37.4		16.5		(4)%	17.2			31.2		5%	29.8
Net contribution	44.3		36%	32.6		125.5		22%	102.9		49.3		10%	44.7			79.9		(2)%	81.2
Non-variable direct expenses	19.0		17%	16.3		51.5		(2)%	52.5
Fixed compensation and benefits											8.6		1%	8.5			16.7		5%	15.9
Other fixed expenses											9.8		13%	8.7			18.9		13%	16.7
Bad debts											0.7		n/m	(0.1		)	0.8		n/m	(0.1		)
Total non-variable direct expenses											19.1		12%	17.1			36.4		12%	32.5
Segment income	$	25.3	55%	$	16.3	$	74.0	47%	$	50.4	$	30.2	9%	$	27.6		$	43.5	(11)%	$	48.7

The following tables set forth transactional revenues and selected data for Commercial Hedging for the periods indicated.


	Exchange-traded										Exchange-traded
	Three Months Ended June 30,					Nine Months Ended June 30,					Three Months Ended March 31,					Six Months Ended March 31,
	2018		% Change	2017		2018		% Change	2017		2019		% Change	2018		2019		% Change	2018
Transactional revenues (in millions):	Transactional revenues (in millions):										Transactional revenues (in millions):
Agricultural	$	22.1	18%	$	18.7	$	59.7	11%	$	53.7	$	19.2	(8)%	$	20.9	$	37.1	(1)%	$	37.6
Energy and renewable fuels	2.2		16%	1.9		6.5		35%	4.8		2.0		(13)%	2.3		4.0		(7)%	4.3
LME metals	12.1		22%	9.9		37.7		(3)%	39.0		15.1		9%	13.9		27.5		7%	25.6
Other	4.1		86%	2.2		11.2		90%	5.9		2.6		(35)%	4.0		5.9		(17)%	7.1
	$	40.5	24%	$	32.7	$	115.1	11%	$	103.4	$	38.9	(5)%	$	41.1	$	74.5	—%	$	74.6
Selected data:	Selected data:										Selected data:
Futures and options (contracts, 000’s)	7,399.2		23%	6,013.8		20,956.5		18%	17,806.6		6,363.8		(13)%	7,344.8		13,090.6		(3)%	13,557.3
Average rate per contract	$	5.38	1%	$	5.33	$	5.41	(5)%	$	5.71	$	5.99	9%	$	5.52	$	5.58	3%	$	5.42
Average customer equity - futures and options (millions)	$	973.0	5%	$	922.5	$	914.5	(2)%	$	937.4
Average client equity - futures and options (millions)											$	918.3	3%	$	892.3	$	960.9	9%	$	885.3


	OTC										OTC
	Three Months Ended June 30,					Nine Months Ended June 30,					Three Months Ended March 31,					Six Months Ended March 31,
	2018		% Change	2017		2018		% Change	2017		2019		% Change	2018		2019		% Change	2018
Transactional revenues (in millions):	Transactional revenues (in millions):										Transactional revenues (in millions):
Agricultural	$	21.0	75%	$	12.0	$	58.2	62%	$	36.0	$	17.5	(21)%	$	22.1	$	32.9	(12)%	$	37.2
Energy and renewable fuels	4.2		11%	3.8		11.1		(10)%	12.3		4.8		23%	3.9		9.3		35%	6.9
Other	1.7		(6)%	1.8		5.7		—%	5.7		8.5		325%	2.0		0.9		(78)%	4.0
	$	26.9	53%	$	17.6	$	75.0	39%	$	54.0	$	30.8	10%	$	28.0	$	43.1	(10)%	$	48.1
Selected data:	Selected data:										Selected data:
Volume (contracts, 000’s)	427.4		12%	382.8		1,165.7		13%	1,035.5		383.5		(7)%	410.4		792.8		7%	738.3
Average rate per contract	$	61.07	39%	$	43.89	$	62.28	25%	$	49.64	$	78.49	18%	$	66.52	$	52.35	(17)%	$	62.98

Three Months Ended ~~June 30, 2018~~March 31, 2019 Compared to Three Months Ended ~~June 30, 2017~~March 31, 2018

Operating revenues increased ~~36%~~3% to ~~$77.9~~$80.6 million in the ~~third~~second quarter compared to ~~$57.1~~$78.3 million in the prior year. Exchange-traded revenues ~~increased 24%~~declined 5%, to ~~$40.5~~$38.9 million in the ~~third~~second quarter, resulting primarily from an increase in agricultural market revenues driven by an increase in volatility in the domestic grain markets. In addition, agricultural exchange-traded revenues benefited from increased activity from customers in both food service and dairy markets as well as in soft commodities, including coffee, cotton and sugar driven by increased market volatility. Uncertainty surrounding the effect of potential U.S. tariffs on global metals markets drove volatility and activity in our LME metals business in the third quarter. Finally, reflected

in the ‘Other” category above we saw an increase in exchange-traded revenues from omnibus relationships introduced by our commercial hedging employees in the third quarter. Overall exchange-traded contract volumes increased 23%, while the average rate per contract increased 1% versus the prior year to $5.38.

OTC revenues increased 53%, to $26.9 million in the third quarter, driven by both a 12% increase in OTC volumes and a 39% increase in the average rate per contract compared to the prior year. These increases were driven by growth in OTC contract volumes in agricultural commodities, primarily with Brazilian grain customers as well as increased activity in the food service, dairy markets and energy markets.

~~Consulting, management, and account fees increased 6% compared to the prior year, while interest income, increased 103%, to $6.7 million compared to the prior year. The increase in interest income was~~ primarily driven by ~~an increase~~lower client activity in ~~short-term rates as well as a result of a 5% increase versus~~both the ~~prior year in average customer equity to $973.0 million in the third quarter.~~

Segment income increased to $25.3 million in the third quarter compared to $16.3 million in the prior year, primarily as a result of the increase in operating revenues. These increases were partially offset by a $2.7 million increase in non-variable direct expenses, primarily related to a $2.2 million increase in bad debt expense versus the prior year related to two customers in our agricultural commodities OTC business. Variable expenses, excluding interest, expressed as a percentage of operating revenues were 42% in the third quarter compared to 43% in the prior year.

~~Nine Months Ended June 30, 2018 Compared to Nine Months Ended June 30, 2017~~

Operating revenues increased 23% to $217.7 million in the current nine months ended compared to $177.3 million in the prior year. Exchange-traded revenues increased 11%, to $115.1 million in the current nine months ended, driven by increased activity from customers in the domestic grain markets and ~~energy and renewable fuels markets as well as an increase~~ in ~~exchange-traded revenues from~~certain omnibus relationships introduced by our commercial hedging employees, which are reflected in the ‘Other’ category above. These ~~increases~~declines were partially offset by ~~lower~~a strong quarter in our LME ~~metals revenues compared to strong performance in the prior year.~~business. Overall exchange-traded contract ~~volume increased 18% while~~volumes decreased 13% versus the prior year, however the average rate per contract ~~declined 5%~~increased 9% to ~~$5.41.~~$5.99.

OTC revenues increased ~~39%~~10%, to ~~$75.0~~$30.8 million in the ~~current nine months ended, driven by both~~second quarter, compared to $28.0 million in the prior year, despite a ~~13% increase~~7% decrease in OTC ~~volumes and~~volumes. OTC revenues were positively affected by a ~~25% increase~~$6.4 million partial reversal of marked-to-market declines recorded in the ~~average rate per contract compared~~first quarter of fiscal 2019, related to certain longer tenor positions which are directionally hedged but suffered declines in value during periods of lower market activity at the ~~prior~~end of the calendar year. ~~These increases were driven by growth in~~Agricultural OTC contract volumes in agricultural commodities, primarily with Brazilian grain customers as well as increased activity in food service and dairy markets and soft commodities. These increases were offset by lower interest rate swap, coffee and energy and renewable fuels revenues.

~~Consulting and management fees increased $0.6 million~~revenues declined 21% versus the prior year, ~~while interest~~as the prior year was a particularly strong quarterly performance in our Brazilian grain business.

Consulting, management, and account fees decreased 7% over the prior year, to $3.8 million in the second quarter. Interest income, increased ~~78%~~43%, to ~~$16.0~~$7.3 million compared to $5.1 million in the prior year. The increase in interest income was ~~primarily~~ driven by an increase in short-term interest rates, as well as a 3% increase in average ~~customer~~ equity ~~declined 2%~~for exchange-traded futures and options clients versus the prior year to ~~$914.5~~$918.3 million in the ~~current nine months ended.~~second quarter.

Segment income increased 9% to ~~$74.0~~$30.2 million in the ~~current nine months ended~~second quarter compared to ~~$50.4~~$27.6 million in the prior year, primarily as a result of the $2.3 million increase in operating revenues ~~as well as~~discussed above and a ~~$1.0~~$2.1 million decline in ~~non-variable direct expenses. The decline~~variable expenses excluding interest expense. These increases were partially offset by a $2.0 million increase in non-variable direct expenses ~~was primarily related to~~including a ~~$1.8~~$0.8 million ~~decline~~increase in bad debt ~~expense, partially offset by an increase in non-variable compensation and benefits.~~expense. Variable expenses, excluding interest, expressed as a percentage of operating revenues decreased to 38% compared to 42% in the prior year, primarily as the result of the partial reversal of the marked-to-market declines recorded in the first quarter of fiscal 2019.

Six Months Ended March 31, 2019 Compared to Six Months Ended March 31, 2018

Operating revenues were relatively flat at $140.4 million in the current six months ended compared to $139.8 million in the prior year. Exchange-traded revenues were $74.5 million in the current six months ended as compared to $74.6 million in the prior year as increases in LME metals revenues were offset by declines in activity in certain omnibus relationships introduced by our commercial hedging employees. Overall exchange-traded contract volumes decreased 3%, however the average rate per contract improved 3% as compared to the prior year to $5.58.

OTC revenues declined 10%, to $43.1 million in the current six months ended, compared to $48.1 million in the prior year, despite a 7% increase in OTC volumes. OTC revenues were negatively affected by $4.6 million of marked-to-market declines related to certain longer tenor positions which are directionally hedged but suffered declines in value during the current six months ended. In addition, agricultural OTC revenues declined versus the prior year as a result of lower activity from clients in the Brazil grain markets. These declines were partially offset by increased OTC revenues in the energy markets.

Consulting, management, and account fees were flat with the prior year ~~period~~ at ~~42%.~~$7.8 million in the current six months ended. Interest income, increased 61%, to $15.0 million compared to $9.3 million in the prior year. The increase in interest income was driven by an increase in short-term interest rates, as well as a 9% increase in average equity for exchange-traded futures and options clients versus the prior year to $960.9 million in the current six months ended.

Segment income decreased 11% to $43.5 million in the current six months ended compared to $48.7 million in the prior year. This was primarily driven by a $3.9 million increase in non-variable direct expenses as well as a modest increase in variable introducing broker commissions and variable compensation as a percentage of operating revenues. The increase in non-variable direct expenses was driven by increases in non-variable compensation and benefits, trade system costs, market information and bad debt expense. Variable expenses, excluding interest, expressed as a percentage of operating revenues increased to 43% compared to 41% in the prior year, primarily as the result of the decline in OTC revenues.

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 ~~175~~170 countries and 140 currencies, which we believe is more than any other payments solution provider, and provide ~~competitive and~~ transparent pricing.

Our proprietary FXecute global payments platform is integrated with a financial information exchange (“FIX”) protocol. This FIX protocol is an electronic communication method for the real-time exchange of information, and we believe it represents one of the first FIX offerings for cross-border payments in exotic currencies. FIX functionality allows ~~customers~~clients to view real time market rates for various currencies, execute and manage orders in real-time, and view the status of their payments through the easy-to-use portal.

Additionally, as a member of ~~SWIFT (Society~~the Society for Worldwide Interbank Financial ~~Telecommunication)~~Telecommunication (“SWIFT”), we are able to offer our services to large money center and global banks seeking more competitive international payment services.

Through this single comprehensive platform and our commitment to ~~customer~~client 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 approximately 300 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 ~~customers~~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.

The following table provides the financial performance and selected data for Global Payments for the periods indicated.


	Three Months Ended June 30,					Nine Months Ended June 30,					Three Months Ended March 31,					Six Months Ended March 31,
(in millions)	2018		% Change	2017		2018		% Change	2017		2019		% Change	2018		2019		% Change	2018
Revenues:
Sales of physical commodities	$	—	—	$	—	$	—	—	$	—	$	—	—	$	—	$	—	—	$	—
Trading gains, net	24.9		14%	21.9		71.0		9%	65.3
Principal gains, net											26.1		17%	22.4		54.2		18%	46.1
Commission and clearing fees	1.1		83%	0.6		3.0		67%	1.8		0.9		(10)%	1.0		1.8		(5)%	1.9
Consulting, management, account fees	—		—	—		—		—	—		0.4		n/m	—		1.0		n/m	—
Interest income	—		—	—		—		—	—		—		—	—		0.1		n/m	—
Other income	—		—	—		—		—	—
Total revenues	26.0		16%	22.5		74.0		10%	67.1		27.4		17%	23.4		57.1		19%	48.0
Cost of sales of physical commodities	—		—	—		—		—	—		—		—	—		—		—	—
Operating revenues	26.0		16%	22.5		74.0		10%	67.1		27.4		17%	23.4		57.1		19%	48.0
Transaction-based clearing expenses	1.0		(17)%	1.2		3.3		(6)%	3.5		1.3		18%	1.1		2.3		—%	2.3
Introducing broker commissions	0.2		(80)%	1.0		1.0		(71)%	3.4		0.2		(50)%	0.4		0.4		(50)%	0.8
Interest expense	0.1		—	—		0.1		—	0.2		0.1		n/m	—		0.2		n/m	—
Net operating revenues	24.7		22%	20.3		69.6		16%	60.0		25.8		18%	21.9		54.2		21%	44.9
Variable direct compensation and benefits	4.8		17%	4.1		13.7		13%	12.1		4.8		12%	4.3		10.1		13%	8.9
Net contribution	19.9		23%	16.2		55.9		17%	47.9		21.0		19%	17.6		44.1		23%	36.0
Non-variable direct expenses	3.9		18%	3.3		11.8		17%	10.1
Fixed compensation and benefits											2.4		33%	1.8		4.5		36%	3.3
Other fixed expenses											2.8		22%	2.3		5.2		13%	4.6
Bad debts											—		—%	—		—		—%	—
Total non-variable direct expenses											5.2		27%	4.1		9.7		23%	7.9
Segment income	$	16.0	24%	$	12.9	$	44.1	17%	$	37.8	$	15.8	17%	$	13.5	$	34.4	22%	$	28.1
Selected data:	Selected data:										Selected data:
Global Payments (# of payments, 000’s)	171.9		(2)%	175.8		481.1		1%	476.1		162.8		6%	153.0		329.4		6%	309.3
Average revenue per trade	$	151.25	18%	$	127.99	$	153.81	9%	$	140.94	$	165.85	8%	$	152.94	$	170.01	10%	$	155.19

Three Months Ended ~~June 30, 2018~~March 31, 2019 Compared to Three Months Ended ~~June 30, 2017~~March 31, 2018

Operating revenues increased ~~16%~~17% to ~~a record $26.0~~$27.4 million in the ~~third~~second quarter compared to ~~$22.5~~$23.4 million in the prior ~~year. The~~year, driven by 6% growth in the volume of payments made ~~declined 2% versus the prior year period while~~and an 8% increase in the average revenue per trade ~~increased by 18%~~ compared to the prior year period. Similar to the prior quarters of fiscal 2018, the volume of payments has declined while the average revenue per trade has increased compared to comparable periods of fiscal 2017, as certain commercial customers who had previously transacted their individual high volume but low value payments through our platform, opened their own bank accounts in certain countries to which we had made payments into on their behalf. Although this process change may lower our number of payments, we still provide the foreign currency funding payments into these customers’ accounts on an aggregated basis in these countries. Overall, operating revenues increased in the third quarter compared to the prior year period as a result of an increase in both the number of active clients and the dollar value of the payments made versus the prior year.

~~Segment income increased 24% to $16.0 million in the third quarter compared to $12.9 million in the prior~~ year. This ~~increase primarily resulted~~growth was driven by increased activity from ~~the increase in operating revenues~~our international banking clients, particularly related to capital transactions, mergers and a decline in variable introducing broker commissions, partially offset by a $0.6 million increase in non-variable direct expenses versus the prior year period, driven in large part by higher non-variable compensationacquisitions, and trade system costs. Variable expenses, excluding interest, expressed as a percentage of operating revenues decreased to 23% in the third quarter compared to 28% in the prior year, mainly as a result of a decrease in introducing broker commissions.

~~Nine Months Ended June 30, 2018 Compared to Nine Months Ended June 30, 2017~~

Operating revenues increased 10% to $74.0 million in the current nine months ended compared to $67.1 million in the prior year. The volume of payments made increased 1% and the average revenue per trade increased 9% versus the prior year to $153.81smaller recurring payments.

Segment income increased 17% to ~~$44.1~~$15.8 million in the ~~current nine months ended~~second quarter compared to ~~$37.8~~$13.5 million in the prior year. This increase primarily resulted from the increase in operating revenues, partially offset by a ~~$1.7~~$1.1 million increase in non-variable direct expenses versus the prior year period, primarily ~~in compensation and benefits and trade system costs.~~driven by higher non-variable compensation. Variable expenses, excluding interest, expressed as a percentage of operating revenues decreased to ~~24%~~23% in the second quarter compared to ~~28%~~25% in the prior year, primarily as a result of a ~~decline~~decrease in introducing broker commissions.

Six Months Ended March 31, 2019 Compared to Six Months Ended March 31, 2018

Operating revenues increased 19% to a record $57.1 million in the current six months ended compared to $48.0 million in the prior year, driven by 6% growth in the volume of payments made and a 10% increase in the average revenue per trade compared to the prior year. This growth was driven by increased activity from our international banking clients, particularly related to capital transactions, mergers and acquisitions, and smaller recurring payments.

Segment income increased 22% to $34.4 million in the current six months ended compared to $28.1 million in the prior year. This increase primarily resulted from the increase in operating revenues, partially offset by a $1.8 million increase in non-variable direct expenses versus the prior year period, primarily driven by higher non-variable compensation. Variable expenses, excluding interest, expressed as a percentage of operating revenues decreased to 22% in the current six months ended compared to 25% in the prior year, primarily as a result of a decrease in transaction-based clearing expenses and introducing broker commissions.

Securities

We provide value-added solutions that facilitate cross-border trading and believe our ~~customers~~clients value our ability to manage complex transactions, including foreign exchange, utilizing our understanding of local market convention, liquidity and settlement protocols around the world. Our ~~customers~~clients include U.S.-based regional and national broker-dealers and institutions investing or executing ~~customer~~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,~~American Depository Receipts (“ADRs”), Global Depository Receipts (“GDRs”) and foreign ordinary shares. We make markets in over ~~3,600~~5,000 ADRs, GDRs and foreign ordinary shares, of which over ~~2,000~~3,600 trade in the OTC market. In addition, we will, on request, make prices in more than 10,000 unlisted foreign securities. We are also a broker-dealer in Argentina and Brazil, where we are active in providing institutional executions in the local capital markets.

We act as an institutional dealer in fixed income securities, including U.S. Treasury, U.S. government agency, agency mortgage-backed, ~~and~~ asset-backed securities as well as investment grade, high yield, convertible and emerging market debt to a ~~customer~~client base including asset managers, commercial bank trust and investment departments, broker-dealers, and insurance companies.

We originate, structure and place debt instruments in the international and domestic capital markets. These instruments include complex asset-backed securities (primarily in Argentina) and domestic municipal securities. 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.

The following table provides the financial performance for Securities for the periods indicated.


	Three Months Ended June 30,					Nine Months Ended June 30,					Three Months Ended March 31,					Six Months Ended March 31,
(in millions)	2018		% Change	2017		2018		% Change	2017		2019		% Change	2018		2019		% Change	2018
Revenues:
Sales of physical commodities	$	—	—	$	—	$	—	—	$	—	$	—	—	$	—	$	—	—	$	—
Trading gains, net	23.7		13%	20.9		74.0		16%	63.9
Principal gains, net											31.0		10%	28.3		66.0		38%	48.0
Commission and clearing fees	4.9		48%	3.3		15.4		97%	7.8		8.1		23%	6.6		14.3		12%	12.8
Consulting, management, and account fees	2.4		(31)%	3.5		8.0		(23)%	10.4		1.9		(32)%	2.8		3.4		(39)%	5.6
Interest income	18.9		54%	12.3		51.0		54%	33.2		31.6		78%	17.8		57.9		80%	32.1
Other income	—		—	—		—		—	—
Total revenues	49.9		25%	40.0		148.4		29%	115.3		72.6		31%	55.5		141.6		44%	98.5
Cost of sales of physical commodities	—		—	—		—		—	—		—		—	—		—		—	—
Operating revenues	49.9		25%	40.0		148.4		29%	115.3		72.6		31%	55.5		141.6		44%	98.5
Transaction-based clearing expenses	10.7		67%	6.4		30.9		65%	18.7		11.0		(11)%	12.3		24.2		20%	20.2
Introducing broker commissions	0.8		(60)%	2.0		4.9		(22)%	6.3		0.5		(74)%	1.9		0.7		(83)%	4.1
Interest expense	14.8		111%	7.0		37.9		130%	16.5		29.1		112%	13.7		52.6		128%	23.1
Net operating revenues	23.6		(4)%	24.6		74.7		1%	73.8		32.0		16%	27.6		64.1		25%	51.1
Variable direct compensation and benefits	6.1		39%	4.4		19.1		28%	14.9		11.9		63%	7.3		22.2		71%	13.0
Net contribution	17.5		(13)%	20.2		55.6		(6)%	58.9		20.1		(1)%	20.3		41.9		10%	38.1
Non-variable direct expenses	7.2		(1)%	7.3		21.5		—%	21.4
Fixed compensation and benefits											5.1		6%	4.8		8.4		(10)%	9.3
Other fixed expenses											3.2		19%	2.7		5.7		14%	5.0
Bad debts											—		—%	—		—		—%	—
Total non-variable direct expenses											8.3		11%	7.5		14.1		(1)%	14.3
Segment income	$	10.3	(20)%	$	12.9	$	34.1	(9)%	$	37.5	$	11.8	(8)%	$	12.8	$	27.8	17%	$	23.8

The following table sets forth operating revenues by product line and selected data for Securities for the periods indicated.

Three Months Ended June 30, Nine Months Ended June 30,
2018 % Change 2017 2018 % Change 2017
Operating revenues by product line (in millions):
Equity Market-Making $ 24.8
92% $ 12.9
$ 70.8
61% $ 43.9
Debt Trading 22.1
(4)% 23.1
68.4
13% 60.7
Investment Banking 0.3
(57)% 0.7
1.7
(6)% 1.8
Asset Management 2.7
(18)% 3.3
7.5
(16)% 8.9
$ 49.9
25% $ 40.0
$ 148.4
29% $ 115.3
Selected data:
Equity Market-Making (gross dollar volume, millions) $ 30,344.1
42% $ 21,298.1
$ 87,088.6
29% $ 67,284.8
Equity Market-Making revenue per $1,000 traded $ 0.68
17% $ 0.58
$ 0.70
9%
$ 0.64
Debt Trading (principal dollar volume, millions) $ 29,922.2
(7)% $ 32,176.4
$ 91,615.0
(11)% $ 102,651.2
Debt Trading revenue per $1,000 traded $ 0.74
3% $ 0.72
$ 0.75
27% $ 0.59
Average assets under management in Argentina (millions) $ 458.4
(30)% $ 653.4
$ 467.3
(18)% $ 570.7



	Three Months Ended March 31,					Six Months Ended March 31,
	2019		% Change	2018		2019		% Change	2018
Operating revenues by product line (in millions):
Equity Capital Markets	$	36.7	30%	$	28.3	$	74.4	62%	$	46.0
Debt Capital Markets	34.3		38%	24.9		63.4		33%	47.7
Asset Management	1.6		(30)%	2.3		3.8		(21)%	4.8
	$	72.6	31%	$	55.5	$	141.6	44%	$	98.5
Selected data:
Equity Capital Markets (gross dollar volume, millions)	$	37,238.8	16%	$	32,010.2	$	80,547.5	42%	$	56,744.5
Equity Capital Markets revenue per $1,000 traded	$	0.70	(8)%	$	0.76	$	0.73	3%	$	0.71
Debt Capital Markets (principal dollar volume, millions)	$	58,230.1	105%	$	28,459.1	$	118,907.3	93%	$	61,692.8
Debt Capital Markets revenue per $1,000 traded	$	0.59	(31)%	$	0.85	$	0.53	(29)%	$	0.75
Average assets under management in Argentina (millions)	$	347.3	(26)%	$	469.8	$	315.0	(33)%	$	471.7

Three Months Ended ~~June 30, 2018~~March 31, 2019 Compared to Three Months Ended ~~June 30, 2017~~March 31, 2018

Operating revenues increased ~~25%~~31% to ~~$49.9~~$72.6 million in the ~~third~~second quarter compared to ~~$40.0~~$55.5 million in the prior year.

Operating revenues in ~~our Securities segment are comprised of activities in four product lines,~~ Equity ~~Market-Making, Debt Trading, Investment Banking and Asset Management. Operating revenues in Equity Market-Making~~Capital Markets increased ~~92%~~30% in the ~~third~~second quarter compared to the prior year period. ~~Gross~~This was a result of a 16% increase in the gross dollar volume traded ~~increased 42%,~~ driven both by increased market volatility ~~the on-boarding of new customers~~ and an increase in market share ~~while~~as well as an increase in securities lending activities. This growth was tempered by an 8% decline in the average revenue per $1,000 ~~traded increased 17% versus the prior year.~~traded. Equity ~~Market-Making~~Capital Markets operating revenues include the trading profits we earn before the related expense deduction for ADR conversion fees. These ADR fees are included in the ~~condensed~~ consolidated income statements as ‘transaction-based clearing expenses’.

Operating revenues in Debt ~~Trading declined $1.0 million or 4%~~Capital Markets increased 38% in the ~~third~~second quarter compared to the prior year, ~~as higher operating revenues~~primarily driven by an increase in interest income in our domestic institutional dealer in fixed income ~~business~~securities and to a lesser extent the acquisition of GMP Securities LLC. These increases were partially offset by ~~lower~~a decline in operating revenues in our Argentina operations due to difficult ~~local economic~~market conditions ~~including spikes~~ in ~~both local interest rates and deteriorating value of the local currency. Operating revenues in the prior year included a $2.5 million gain on the sale of exchange shares held in Argentina.~~that country. Asset Management operating revenues ~~declined 18%~~decreased 30% in the ~~third~~second quarter compared to the prior year as ~~this business faced the same headwinds as our Argentina debt trading business, resulting in the average~~ assets under management ~~declining 30%~~decreased 26% to ~~$458.4~~$347.3 million in the ~~third~~second quarter compared to ~~$653.4 million in the prior year.~~

~~Segment income decreased 20% to $10.3 million in the third quarter compared to $12.9~~$469.8 million in the prior year. The decline in both Asset Management operating revenues and assets under management are primarily driven by difficult market conditions in Argentina including the devaluation of the Argentine Peso as well as elevated interest and inflation rates.

Segment income decreased 8% to $11.8 million in the second quarter compared to $12.8 million in the prior year, as the increase in Equity Capital Markets operating revenues was ~~more than~~ offset by increased interest expense related to our securities lending activities as well as an increase in compensation and benefits related to the launch of our prime brokerage initiative. In addition, the increase in Debt Capital Markets operating revenues was mostly offset by higher interest ~~expense in our domestic institutional fixed income and securities lending businesses as well as the prior year period inclusion of the $2.5 million gain on the sale of exchange shares in Argentina.~~expense. Variable expenses, excluding interest, expressed as a percentage of operating revenues ~~increased~~decreased to ~~35%~~32% in the ~~third~~second quarter compared to ~~32%~~39% in the prior year, primarily as the result of ~~an increase~~a decrease in transaction-based clearing ~~expenses.~~expenses and introducing broker commissions.

~~Nine~~Six Months Ended ~~June 30, 2018~~March 31, 2019 Compared to ~~Nine~~Six Months Ended ~~June 30, 2017~~March 31, 2018

Operating revenues increased ~~29%~~44% to ~~$148.4~~$141.6 million in the current ~~nine~~six months ended compared to ~~$115.3~~$98.5 million in the prior year.

Operating revenues in Equity ~~Market-Making~~Capital Markets increased ~~61%~~62% in the current ~~nine~~six months ended compared to the prior year ~~primarily as a result of a 29% increase in the gross~~period. Gross dollar volume traded increased 42% driven both by increased market volatility and ~~a 9%~~market share as well as growth in our securities lending activities. The increased volatility also contributed to the 3% increase in the average revenue per $1,000 traded. Equity ~~Market-Making~~Capital Markets operating revenues include the trading profits we earn before the related expense deduction for ADR conversion fees. These ADR fees are included in the consolidated income statements as ‘transaction-based clearing expenses’.

Operating revenues in Debt ~~Trading~~Capital Markets increased ~~13%~~33% in the current ~~nine~~six months ended compared to the prior year, primarily ~~as a result of~~driven by an increase in interest income in our domestic institutional dealer in fixed income securities business ~~as well as increased activity~~and to a lesser extent the acquisition of GMP Securities LLC. These increases were partially offset by a decline in operating revenues in our Argentina and municipal securities businesses. ~~In addition, operating revenues in the prior year period included a $2.5 million gain on the sale of exchange shares held in Argentina.~~ Asset Management operating revenues decreased ~~16%~~21% in the current ~~nine~~ six

months ended compared to the prior year as ~~the average~~ assets under management ~~declined 18%~~decreased 33% to ~~$467.3~~$315.0 million in the current ~~nine~~six months ended compared to ~~$570.7~~$471.7 million in the prior year. The decline in both Asset Management operating revenues and assets under management are primarily driven by difficult market conditions in Argentina including the devaluation of the Argentine Peso as well as elevated interest and inflation rates.

Segment income ~~declined 9%~~increased 17% to ~~$34.1~~$27.8 million in the current ~~nine~~six months ended compared to ~~$37.5~~$23.8 million in the prior year, primarily as a result of the increase in Equity Capital Markets operating revenues as the increase in Debt Capital Markets operating revenues ~~were~~was more than offset by ~~an increase in~~higher interest ~~expense, primarily in our Debt Trading~~

~~business as well as in securities lending combined with an increase in transaction-based clearing expenses in Equity Market-Making.~~expense. Variable expenses, excluding interest, expressed as a percentage of operating revenues ~~increased~~decreased to ~~37%~~33% in the current ~~nine~~six months ended compared to ~~35%~~38% in the prior year, primarily as athe result of ~~an increase~~a decrease in transaction-based clearing ~~expenses.~~expenses and introducing broker commissions.

Physical Commodities

This segment consists of our physical Precious Metals trading and Physical Ag & Energy commodity businesses. In Precious Metals, we provide a full range of trading and hedging capabilities, including OTC products, to select producers, consumers, and investors. In our trading activities, we act as a principal, committing our own capital to buy and sell precious metals on a spot and forward basis.

In our Physical Ag & Energy commodity business, we act as a principal to facilitate financing, structured pricing and logistics services to clients across the commodity complex, including energy commodities, grains, oil seeds, cotton, coffee, cocoa, edible oils and feed products. We provide financing to commercial commodity-related companies against physical inventories. We use sale and repurchase agreements to purchase commodities evidenced by warehouse receipts, subject to a simultaneous agreement to sell such commodities back to the original seller at a later date.

Transactions where the sale and repurchase price are fixed upon execution, and meet additional required conditions, are accounted for as product financing arrangements, and accordingly no commodity inventory, purchases or sales are recorded. Transactions where the repurchase price is not fixed at execution do not meet all the criteria to be accounted for as product financing arrangements, and therefore are recorded as commodity inventory, purchases and sales.

Precious metals inventory held by INTL FCStone Ltd, a United Kingdom based broker-dealer subsidiary, is measured at fair value, with changes in fair value included as a component of ‘trading gains, net’ in the condensed consolidated income statements. INTL FCStone Ltd precious metals sales and cost of sales are presented on a net basis and included as a component of ‘trading gains, net’ in the condensed consolidated income statements. Precious metals inventory held by our subsidiaries that are not broker-dealers are valued at the lower of cost or net realizable value. Precious metals sales and cost of sales for subsidiaries that are not broker-dealers are recorded on a gross basis.

In our Physical Ag and Energy commodity business, we value our agricultural inventory at net realizable value, which approximates fair value less disposal costs. The agricultural inventories have reliable, readily determinable and realizable market prices, have relatively insignificant costs of disposal and are available for immediate delivery. Revenues generated from our Physical Ag and Energy commodity business are recorded on a gross basis.

Operating gains and losses from our Precious Metals commodities derivatives activities are included in ‘trading gains, net’ in the condensed consolidated income statements. Operating gains and losses from our Physical Ag and Energy commodities derivatives activities are included in ‘cost of sales of physical commodities’ in the condensed consolidated income statements. We generally mitigate the price risk associated with commodities held in inventory through the use of derivatives. We do not elect hedge accounting under U.S. GAAP in accounting for this price risk mitigation. Management continues to evaluate performance and allocate resources on an operating revenue basis.

The following table provides the financial performance for Physical Commodities for the periods indicated.


	Three Months Ended June 30,					Nine Months Ended June 30,					Three Months Ended March 31,					Six Months Ended March 31,
(in millions)	2018		% Change	2017		2018		% Change	2017		2019		% Change	2018		2019			% Change	2018
Revenues:
Sales of physical commodities	$	6,866.2	29%	$	5,317.0	$	20,836.4	26%	$	16,486.3	$	6,929.5	11%	$	6,255.8	$	13,225.3		(5)%	$	13,970.2
Trading gains (losses), net	4.6		n/m	1.4		8.2		n/m	2.4
Principal gains, net											8.0		86%	4.3		10.6			194%	3.6
Commission and clearing fees	0.4		33%	0.3		1.5		114%	0.7		—		n/m	0.5		0.1			(91)%	1.1
Consulting, management, and account fees	0.4		100%	0.2		0.8		(20)%	1.0		0.6		100%	0.3		1.1			175%	0.4
Interest income	1.8		29%	1.4		5.4		13%	4.8		2.8		100%	1.4		5.6			56%	3.6
Other income	—		—	—		—		—	—
Total revenues	6,873.4		29%	5,320.3		20,852.3		26%	16,495.2		6,940.9		11%	6,262.3		13,242.7			(5)%	13,978.9
Cost of sales of physical commodities	6,858.5		29%	5,308.3		20,811.3		26%	16,462.2		6,921.1		11%	6,246.8		13,208.6			(5)%	13,952.8
Operating revenues	14.9		24%	12.0		41.0		24%	33.0		19.8		28%	15.5		34.1			31%	26.1
Transaction-based clearing expenses	0.2		—%	0.2		0.7		17%	0.6		0.3		—%	0.3		0.5			—%	0.5
Introducing broker commissions	0.1		n/m	—		0.2		—%	0.2		0.1		n/m	—		0.1			—%	0.1
Interest expense	3.2		100%	1.6		7.8		59%	4.9		4.3		59%	2.7		8.0			74%	4.6
Net operating revenues	11.4		12%	10.2		32.3		18%	27.3		15.1		21%	12.5		25.5			22%	20.9
Variable direct compensation and benefits	3.3		27%	2.6		9.2		24%	7.4		3.6		16%	3.1		6.9			17%	5.9
Net contribution	8.1		7%	7.6		23.1		16%	19.9		11.5		22%	9.4		18.6			24%	15.0
Non-variable direct expenses	3.0		(9)%	3.3		10.3		18%	8.7
Fixed compensation and benefits											2.3		15%	2.0		4.5			18%	3.8
Other fixed expenses											1.4		8%	1.3		2.7			(10)%	3.0
Bad debts											—		n/m	0.5		0.1			(80)%	0.5
Bad debt on physical coal	—		n/m	—		1.0		n/m	—		—		—%	—		(2.4		)	(340)%	1.0
Total non-variable direct expenses											3.7		(3)%	3.8		4.9			(41)%	8.3
Segment income	$	5.1	19%	$	4.3	$	11.8	5%	$	11.2	$	7.8	39%	$	5.6	$	13.7		104%	$	6.7

The following tables set forth operating revenue by product line and selected data for Physical Commodities for the periods indicated.


	Precious Metals										Precious Metals
	Three Months Ended June 30,					Nine Months Ended June 30,					Three Months Ended March 31,					Six Months Ended March 31,
	2018		% Change	2017		2018		% Change	2017		2019		% Change	2018		2019		% Change	2018
Total revenues	$	6,620.1	29%	$	5,146.4	$	20,187.9	27%	$	15,938.6	$	6,670.9	10%	$	6,037.7	$	12,631.8	(7)%	$	13,567.8
Cost of sales of physical commodities	6,611.8		29%	5,139.2		20,165.4		27%	15,920.2		6,659.0		10%	6,028.8		12,612.2		(7)%	13,553.6
Operating revenues	$	8.3	15%	$	7.2	$	22.5	22%	$	18.4	$	11.9	34%	$	8.9	$	19.6	38%	$	14.2
Selected data:	Selected data:										Selected data:
Gold equivalent ounces traded (000’s)	72,300.6		98%	36,553.6		160,802.8		82%	88,122.2		77,721.1		41%	54,999.0		172,940.7		95%	88,502.1
Average revenue per ounce traded	$	0.11	(45)%	$	0.20	$	0.14	(33)%	$	0.21	$	0.15	(6)%	$	0.16	$	0.11	(31)%	$	0.16


	Physical Ag & Energy										Physical Ag & Energy
	Three Months Ended June 30,					Nine Months Ended June 30,					Three Months Ended March 31,					Six Months Ended March 31,
	2018		% Change	2017		2018		% Change	2017		2019		% Change	2018		2019		% Change	2018
Total revenues	$	253.3	46%	$	173.9	$	664.4	19%	$	556.6	$	270.0	20%	$	224.6	$	610.9	49%	$	411.1
Cost of sales of physical commodities	246.7		46%	169.1		645.9		19%	542.0		262.1		20%	218.0		596.4		49%	399.2
Operating revenues	$	6.6	38%	$	4.8	$	18.5	27%	$	14.6	$	7.9	20%	$	6.6	$	14.5	22%	$	11.9

Three Months Ended ~~June 30, 2018~~March 31, 2019 Compared to Three Months Ended ~~June 30, 2017~~March 31, 2018

Operating revenues for Physical Commodities increased ~~24%~~28% to ~~$14.9~~$19.8 million in the ~~third~~second quarter compared to ~~$12.0~~$15.5 million in the prior year.

Precious Metals operating revenues increased ~~15%~~34% to ~~$8.3~~$11.9 million in the ~~third~~second quarter compared to ~~$7.2~~$8.9 million in the prior year as a result of a ~~98%~~41% increase in the number of ounces traded, which was partially offset by a ~~45%~~6% decline in the average revenue per ounce traded compared to the prior year.

Operating revenues in Physical Ag & Energy increased ~~38%~~20% to ~~$6.6~~$7.9 million in the ~~third~~second quarter compared to the prior year. The increase in operating revenues is largely due to increased ~~trading~~ activity in ~~our U.S. subsidiary, FCStone Merchant Services, LLC, across multiple commodities including cotton, cocoa, edible oils and energy along with an increase in its~~ commodity financing programs ~~with customers.~~as well as in energy products, which was tempered by lower activity in cotton markets as opposed to the prior year.

Segment income increased ~~19%~~39% to ~~$5.1~~$7.8 million in the ~~third~~second quarter compared to ~~$4.3~~$5.6 million in the prior year, primarily as a result of the increase in operating revenues as well as a ~~$0.3~~$0.1 million decline in non-variable direct expenses. ~~Non-variable expenses declined $0.3 million as a result of a $0.7 million recovery of a bad debt expense in our Precious Metals business~~

~~originally recorded in the second quarter of fiscal 2018, which was partially offset by a $0.4 million increase in professional fees incurred related to our exit of our physical coal business.~~

~~Nine~~Six Months Ended ~~June 30, 2018~~March 31, 2019 Compared to ~~Nine~~Six Months Ended ~~June 30, 2017~~March 31, 2018

Operating revenues for Physical Commodities increased ~~24%~~31% to ~~$41.0~~$34.1 million in the current ~~nine~~six months ended compared to ~~$33.0~~$26.1 million in the prior year.

Precious Metals operating revenues increased ~~22%~~38% to ~~$22.5~~$19.6 million in the current ~~nine~~six months ended compared to ~~$18.4~~$14.2 million in the prior year. Operating revenues increased from the prior year period as a result of a ~~82%~~95% increase in the number of ounces traded, which was partially offset by a ~~33%~~31% decline in the average revenue per ounce traded.

Operating revenues in Physical Ag & Energy increased ~~27%~~22% to ~~$18.5~~$14.5 million in the current ~~nine~~six months ended compared to ~~$14.6~~$11.9 million in the prior year. The increase in operating revenues is ~~primarily~~largely due to ~~business expansion~~increased activity in ~~our U.S. subsidiary FCStone Merchant Services, LLC, resulting in increased transactions in cotton, cocoa and edible oils along with an increase in its~~ commodity financing programs as well as in energy and cocoa products, which was tempered by lower activity in cotton and edible oil markets as opposed to the prior year.

During the quarter ended December 31, 2018, we reached settlements with ~~customers from both existing~~clients, paying $8.4 million related to demurrage, dead freight, and ~~new customer relationships.~~other penalty charges regarding coal supplied during fiscal 2017. The settlement amount paid was less than the accrued liability for the transactions recorded during fiscal 2017 and fiscal 2018, and accordingly we recorded a recovery on the bad debt on physical coal of $2.4 million in the quarter ended December 31, 2018. The prior year period included $1.0 million of bad debt on physical coal related to our exit of the physical coal business.

Segment income increased 5%104% to ~~$11.8~~$13.7 million in the current ~~nine~~six months ended compared to ~~$11.2~~$6.7 million in the prior year driven by the increase in operating ~~revenues.~~revenues as well as the recovery on the bad debt on physical coal. The increase in operating revenues was partially offset by a ~~$2.9~~$3.4 million increase in interest expense as well as a ~~$1.6~~$0.7 million increase in non-variable ~~direct expenses. Non-variable direct expenses increased primarily due to a $0.5 million increase in~~ compensation and ~~benefits, a $1.1 million increase in professional fees related to our exit of the physical coal business.~~benefits.

Clearing and Execution Services

We provide competitive and efficient clearing and execution in all major futures and securities exchanges globally as well as prime brokerage in all major foreign currency pairs and swap transactions. Through our platform, client orders are accepted and directed to the appropriate exchange for execution. We then facilitate the clearing of client transactions. Clearing involves the matching of client trades with the exchange, the collection and management of client margin deposits to support the transactions, and the accounting and reporting of the transactions to clients.

As of ~~June 30, 2018,~~March 31, 2019, we held ~~$2.4~~$2.1 billion in required ~~customer~~client segregated assets, which we believe makes us the third largest ~~independent~~non-bank futures commission merchant (“FCM”) in the United States, ~~not affiliated with a major financial institution or commodity intermediary, end-user or producer,~~ as measured by required ~~customer~~client segregated assets. We seek to leverage our capabilities and capacity by offering facilities management or outsourcing solutions to other FCM’s. ~~Through our~~

We are an independent full-service provider to introducing broker-dealers (“IBD’s”) of clearing, custody, research, syndicated and security-based lending products and services, including a proprietary technology platform ~~customer orders are accepted and directed~~which offers seamless connectivity to ~~the appropriate exchange for execution. We then facilitate~~ensure a positive client experience through the clearing ~~of customer transactions. Clearing involves the matching of customer trades with the exchange, the collection~~ and settlement process. Our independent wealth management ~~of customer margin deposits~~business, which offers a comprehensive product suite to ~~support the transactions, and the accounting and reporting of the transactions to customers.~~

retail clients nationwide, clears through this platform. We believe we are one of the ~~largest non-bank prime brokers and swap dealers~~leading mid-market clearers in the ~~world. Through this offering, we~~securities industry, with over 70 correspondent clearing relationships with over $15 billion in assets under management or administration as of March 31, 2019.

We provide prime brokerage foreign exchange (“FX”) services to financial institutions and professional traders. We provide our ~~customers~~clients with the full range of OTC products, including 24-hour a day execution of spot, forwards and options as well as non-deliverable forwards in both liquid and exotic currencies. We also operate a proprietary foreign exchange desk that arbitrages the exchange-traded foreign exchange markets with the cash markets.

~~With~~Through our ~~correspondent securities clearing business, we are an independent full-service provider to introducing broker-dealers~~London-based Europe, Middle East and Africa (“~~IBD’s”~~EMEA”) of clearing, custody, research, syndicated and security-based lending products and services, including a proprietary technology platform which offers seamless connectivity to ensure a positive customer experience through the clearing and settlement process.

We have an independent wealth management business which offers a comprehensive product suite to retail customers nationwide. As a result we are one of the leading mid-market clearers in the securities industry, with approximately 60 correspondent clearing relationships with over $15 billion in assets under management or administration as of June 30, 2018.

~~Our London-based EMEA~~ oil voice brokerage business, ~~provides~~we employ over 30 employees providing brokerage services across the fuel, crude, and middle distillates markets with over 200 well known commercial and institutional ~~customers~~clients throughout ~~Europe, the Middle East and Africa.~~

EMEA.

The following table provides the financial performance and selected data for Clearing and Execution Services for the periods indicated.


	Three Months Ended June 30,					Nine Months Ended June 30,					Three Months Ended March 31,						Six Months Ended March 31,
(in millions)	2018		% Change	2017		2018		% Change	2017		2019		% Change	2018			2019		% Change	2018
Sales of physical commodities	$	—	—	$	—	$	—	—	$	—	$	—	—	$	—		$	—	—	$	—
Trading gains, net	11.4		5%	10.9		35.1		5%	33.4
Principal gains, net											4.2		(18)%	5.1			11.6		18%	9.8
Commission and clearing fees	58.0		36%	42.5		163.2		30%	125.6		48.5		(27)%	66.4			113.5		(5)%	119.1
Consulting, management, and account fees	11.3		30%	8.7		31.4		29%	24.3		11.6		9%	10.6			23.7		18%	20.1
Interest income	8.2		148%	3.3		19.4		96%	9.9		9.3		58%	5.9			20.0		79%	11.2
Other	—		—	—		—		—	—
Total revenues	88.9		36%	65.4		249.1		29%	193.2		73.6		(16)%	88.0			168.8		5%	160.2
Cost of physical commodities sold	—		—	—		—		—	—		—		—	—			—		—	—
Operating revenues	88.9		36%	65.4		249.1		29%	193.2		73.6		(16)%	88.0			168.8		5%	160.2
Transaction-based clearing expenses	27.2		51%	18.0		73.0		33%	54.9		21.2		(20)%	26.6			47.6		4%	45.8
Introducing broker commissions	26.6		26%	21.1		78.7		28%	61.4		18.3		(35)%	28.0			45.5		(13)%	52.1
Interest expense	2.4		243%	0.7		5.5		206%	1.8		3.1		94%	1.6			7.2		132%	3.1
Net operating revenues	32.7		28%	25.6		91.9		22%	75.1		31.0		(3)%	31.8			68.5		16%	59.2
Variable direct compensation and benefits	8.3		28%	6.5		23.1		26%	18.4		7.6		(4)%	7.9			15.4		4%	14.8
Net contribution	24.4		28%	19.1		68.8		21%	56.7		23.4		(2)%	23.9			53.1		20%	44.4
Non-variable direct expenses	10.7		(15)%	12.6		31.9		(13)%	36.6
Fixed compensation and benefits											5.7		6%	5.4			10.7		6%	10.1
Other fixed expenses											6.1		3%	5.9			13.0		17%	11.1
Bad debts											—		n/m	(0.1		)	0.1		n/m	—
Total non-variable direct expenses											11.8		5%	11.2			23.8		12%	21.2
Segment income	$	13.7	111%	$	6.5	$	36.9	84%	$	20.1	$	11.6	(9)%	$	12.7		$	29.3	26%	$	23.2

The following table sets forth operating revenues by product line and selected data for Clearing and Execution Services for the periods indicated.


	Three Months Ended June 30,					Nine Months Ended June 30,					Three Months Ended March 31,					Six Months Ended March 31,
(in millions)	2018		% Change	2017		2018		% Change	2017		2019		% Change	2018		2019		% Change	2018
Operating revenues by product line (in millions):	Operating revenues by product line (in millions):										Operating revenues by product line (in millions):
Exchange-traded Futures & Options	$	50.8	77%	$	28.7	$	136.3	61%	$	84.6	$	35.3	(29)%	$	49.6	$	85.7	—%	$	85.5
FX Prime Brokerage	5.1		13%	4.5		14.8		3%	14.3		4.8		(4)%	5.0		12.3		27%	9.7
Correspondent Clearing	8.1		27%	6.4		20.9		6%	19.7		8.4		24%	6.8		16.7		30%	12.8
Independent Wealth Management	18.3		(3)%	18.9		55.6		2%	54.7		17.9		(5)%	18.8		38.1		2%	37.3
Derivative Voice Brokerage	6.6		(4)%	6.9		21.5		8%	19.9		7.2		(8)%	7.8		16.0		7%	14.9
Operating revenues	$	88.9	36%	$	65.4	$	249.1	29%	$	193.2	$	73.6	(16)%	$	88.0	$	168.8	5%	$	160.2
Selected data:	Selected data:										Selected data:
Exchange-traded - futures and options (contracts, 000’s)	28,233.5		55%	18,176.5		77,234.3		38%	55,956.4		22,696.5		(23)%	29,351.3		53,496.8		9%	49,000.9
Exchange-traded - futures and options average rate per contract	$	1.51	12%	$	1.35	$	1.51	16%	$	1.30	$	1.19	(20)%	$	1.48	$	1.26	(16)%	$	1.50
Average customer equity - futures and options (millions)	$	1,271.0	25%	$	1,016.2	$	1,232.4	15%	$	1,073.4
Average client equity - futures and options (millions)											$	1,018.3	(14)%	$	1,178.6	$	1,173.7	(3)%	$	1,213.1
FX Prime Brokerage volume (U.S. notional, millions)	$	93,007.8	(36)%	$	145,679.8	$	330,178.9	(32)%	$	487,145.5	$	80,435.6	(35)%	$	122,869.0	$	170,380.3	(28)%	$	237,171.0

Three Months Ended ~~June 30, 2018~~March 31, 2019 Compared to Three Months Ended ~~June 30, 2017~~March 31, 2018

Operating revenues ~~increased 36%~~decreased 16% to ~~$88.9~~$73.6 million in the ~~third~~second quarter compared to ~~$65.4~~$88.0 million in the prior year.

Operating revenues in our Exchange-traded Futures & Options business ~~increased 77%~~decreased 29% to ~~$50.8~~$35.3 million in the ~~third~~second quarter compared to ~~$28.7~~$49.6 million in the prior year as a result of a ~~55% increase~~23% decrease in exchange-traded volumes and a ~~12% increase~~20% decline in the average rate per contract compared to the prior year period. ~~In addition,~~This decline was partially offset by a $2.9 million increase in interest income in the Exchange-traded Futures & Options business ~~increased $3.9 million~~ to ~~$5.9~~$6.8 million in the ~~third~~second quarter due to an increase in short-term ~~rates and a 25% increase in average customer~~rates. Average client equity declined 14% as compared to ~~$1.3~~the prior year to $1.0 billion.

Operating revenues in our FX Prime Brokerage ~~increased 13%~~decreased 4% compared to the prior year to ~~$5.1~~$4.8 million in the ~~third~~second quarter, ~~despite~~as a ~~36%~~result of a 35% decline in foreign exchange ~~volumes, as market volatility drove a widening of spreads in this business.~~

volumes.

Correspondent Clearing operating revenues increased ~~27%~~24% compared to the prior year to ~~$8.1~~$8.4 million in the ~~third~~second quarter, while operating revenues in Independent Wealth Management declined 3%5% versus the prior year to ~~$18.3~~$17.9 million. ~~Included within these operating revenues,~~In the Correspondent Clearing ~~and Independent Wealth Management businesses had~~business, interest income ofincreased $0.4 million to $2.2 million in the second quarter and ~~$0.1~~fee income related to money market/FDIC sweep balances increased $1.4 million ~~respectively.~~to $3.7 million, both of which were primarily driven by an increase in short term interest rates. Operating revenues in Derivative Voice Brokerage declined 4%8% to ~~$6.6~~$7.2 million in the ~~third~~second quarter compared to the prior year.

Segment income ~~increased~~decreased to ~~$13.7~~$11.6 million in the ~~third~~second quarter compared to ~~$6.5~~$12.7 million in the prior year, primarily as a result of the ~~increase~~decrease in operating revenues ~~as well as a $1.9 million decline~~ in ~~non-variable direct expenses, including a $1.2 million reduction in compensation~~our Exchange-traded Futures & Options and benefits, resulting from a cost savings initiative in the FX Prime Brokerage and Correspondent Clearing businesses. Segment income in the third quarter includes a $0.9 million quarterly charge to compensation and benefits per the terms of the acquisition of the Derivative Voice Brokerage businesses, which declined $1.0 million and $0.5 million, respectively. The decline in operating revenues in our Exchange-traded Futures & Options business ~~which will continue to be expensed through the end of fiscal 2018 based upon the employees’ continued employment.~~was tempered by lower transaction-based clearing expenses and introducing broker commissions. Variable expenses, excluding interest, as a percentage of operating revenues were ~~70%~~64% in ~~both~~ the ~~third~~second quarter ~~and~~compared to 71% in the prior ~~year.~~year primarily due to lower introducing broker commissions.

~~Nine~~Six Months Ended ~~June 30, 2018~~March 31, 2019 Compared to ~~Nine~~Six Months Ended ~~June 30, 2017~~March 31, 2018

Operating revenues increased ~~29%~~5% to ~~$249.1~~$168.8 million in the current ~~nine~~six months ended compared to ~~$193.2~~$160.2 million in the prior year.

Operating revenues in our Exchange-traded Futures & Options business ~~increased 61% to $136.3~~were relatively flat at $85.7 million in the current ~~nine~~six months ended compared to ~~$84.6~~$85.5 million in the prior ~~year as a result of a 38% increase in exchange-traded~~year. Exchange-traded volumes ~~and a 16% increase in~~increased 9%, however the average rate per contract declined 16% as compared to the prior year period. Interest income in the Exchange-traded Futures & Options business increased ~~$7.6~~$7.2 million to ~~$13.3~~$14.7 million in the current ~~nine~~six months ended primarily as a result of an increase in short-term rates ~~and~~which was partially offset by a ~~15% increase~~3% decrease in average ~~customer~~client equity to $1.2 billion.

Operating revenues in our FX Prime Brokerage increased 3%27% to ~~$14.8~~$12.3 million in the current ~~nine~~six months ended compared to ~~$14.3~~$9.7 million in the prior year despite a ~~32%~~28% decrease in foreign exchange volumes as ~~market volatility drove~~the first quarter of fiscal 2019 includes a ~~widening of spreads in this business.~~$2.7 million settlement received related to the Barclays PLC ‘last look’ class action matter.

Operating revenues in the Correspondent Clearing increased 6%30% to ~~$20.9~~$16.7 million in the current ~~nine~~six months ended, while Independent Wealth Management operating revenues increased 2% versus the prior year period to ~~$55.6~~$38.1 million. ~~Included within these operating revenues,~~In the Correspondent Clearing ~~and Independent Wealth Management businesses had~~business, interest income increased $1.5 million to $4.8 million the second quarter and fee income related to money market/FDIC sweep balances increased $3.0 million to $7.0 million, both of ~~$5.5 million and $0.3 million, respectively.~~which were primarily driven by an increase in short term interest rates. Operating revenues in the Derivative Voice Brokerage business increased 8%7% versus the prior year to ~~$21.5~~$16.0 million in the current ~~nine~~six months ended.

Segment income increased 26% to ~~$36.9~~$29.3 million in the current ~~nine~~six months ended compared to ~~$20.1~~$23.2 million in the prior year, primarily as a result of the increase in operating revenues ~~as well as~~which was partially offset by a ~~$4.7~~$2.6 million ~~decline~~increase in non-variable direct expenses compared to the prior year period. ~~This decline~~The increase in non-variable direct expenses, was primarily a result of ~~cost savings initiatives~~an increase in ~~the FX prime brokerage and Correspondent Clearing businesses. Segment income in the current nine months ended includes a quarterly charge, aggregating to $2.7 million, to~~non-variable compensation and benefits ~~per~~as well as increased professional fees related to the ~~terms of the acquisition of the oil voice brokerage business which will continue to be expensed through the end of fiscal 2018 based upon the employees continued employment.~~Options Sellers and Barclays matters. Variable expenses, excluding interest, as a percentage of operating revenues were ~~70%~~64% in ~~both~~ the current ~~nine~~six months ended ~~and~~compared to 70% in the prior year.

Liquidity, Financial Condition and Capital Resources

Overview

Liquidity is defined as our ability to generate sufficient amounts of cash to meet all of our cash needs. Liquidity is of critical importance to us and imperative to maintain our operations on a daily basis. Our senior management establishes liquidity and capital policies, and monitors liquidity on a daily basis. Senior management reviews business performance relative to these policies and monitors the availability of our internal and external sources of financing. Liquidity and capital matters are reported regularly to our board of directors.

INTL FCStone Financial is registered as a broker-dealer with the Securities and Exchange Commission (“SEC”) and is a member of the Financial Industry Regulatory Authority (“FINRA”) and the Municipal Securities Rulemaking Board (“MSRB”). In addition, INTL FCStone Financial is registered as a futures commission merchant with the CFTC and NFA, and a member of various commodities and futures exchanges in the U.S. and abroad. INTL FCStone Financial has a responsibility to meet margin calls at all exchanges on a daily basis and intra-day basis, if necessary. We require our ~~customers~~clients to make any required margin deposits the next business day, and we require our largest ~~customers~~clients to make intra-day margin payments during periods of significant price movement. Margin required to be posted to the exchanges is a function of the net open positions of our ~~customers~~clients and the required margin per contract. INTL FCStone Financial is subject to minimum capital requirements under Section 4(f)(b) of the Commodity Exchange Act, Part 1.17 of the rules and regulations of the CFTC and the SEC Uniform Net Capital Rule 15c3-1 under the Securities Exchange Act of 1934. These rules specify the minimum amount of capital that must

be available to support our ~~customers’~~clients’ open trading positions, including the amount of assets that INTL FCStone Financial must maintain in relatively liquid form, and are designed to measure general financial integrity and liquidity. INTL FCStone Financial is also subject to the Rule 15c3-3 of the Securities Exchange Act of 1934, as amended (“Customer Protection Rule”).

INTL FCStone Ltd, our U.K. regulated subsidiary, is required to be compliant with the U.K.’s Individual Liquidity Adequacy Standards (“ILAS”). To comply with these standards, we have implemented daily liquidity procedures, conduct periodic reviews of liquidity by stressed scenarios, and have created liquidity buffers.

Our wholly owned ~~subsidiaries, INTL Custody & Clearing Solutions Inc. (formerly Sterne Agee Clearing, Inc.) and~~subsidiary, SA Stone Wealth Management Inc. (formerly Sterne Agee Financial Services, Inc.) ~~are~~, is subject to the SEC Uniform Net Capital Rule 15c3-1 under the Securities Exchange Act of 1934.

In addition, in our physical commodities trading, commercial hedging OTC, securities and foreign exchange trading activities, we may be called upon to meet margin calls with our various trading counterparties based upon the underlying open transactions we have in place with those counterparties.

We continuously review our overall credit and capital needs to ensure that our capital needs to ensure that our capital base, both stockholders’ equity and debt, as well as available credit facilities can appropriately support the anticipated financing needs of our operating subsidiaries.

As of ~~June 30, 2018,~~March 31, 2019, we had total equity capital of ~~$487.7~~$551.8 million, outstanding loans under revolving credit facilities of $256.8 million, and $171.8 million outstanding ~~bank loans of $360.6 million.~~for our senior secured term loan.

A substantial portion of our assets are liquid. As of ~~June 30, 2018,~~March 31, 2019, approximately 98% of our assets consisted of cash; securities purchased under agreements to resell; securities borrowed; deposits with and receivables from exchange-clearing organizations, broker-dealers, clearing organizations and counterparties; ~~customer~~client receivables, marketable financial instruments and investments, and physical commodities inventory. All assets that are not ~~customer~~client and counterparty deposits are financed by our equity capital, bank loans, short-term borrowings from financial instruments sold, not yet purchased and under repurchase agreements, securities loaned, and other payables.

On December 22, 2017, President Trump signed into law the Tax Reform. Among the significant changes to the U.S. federal income tax rules, the Tax Reform reduces the marginal U.S. corporate income tax rate from 35% to 21%, limits the deduction for net interest expense, shifts the United States toward a more territorial tax system, and imposes new rules to combat erosion of the U.S. federal income tax base. While our analysis and accounting for the Tax Reform’s consolidated financial statement impact on our cash tax liability and financial condition is complete, there are uncertainties regarding the interpretation and application of certain provisions in the Tax Reform. In the absence of guidance on these issues, we will use what we believe are reasonable interpretations and assumptions in applying the Tax Reform for purposes of determining our cash tax liabilities and results of operations, which may change as we receive additional clarification and implementation guidance and as the interpretation of the Tax Reform evolves over time. It is also possible that the Internal Revenue Service (“IRS”) could issue subsequent guidance or take positions on audit that differ from the interpretations and assumptions that we have previously made. Changes in IRS guidance and the results of their audits, as well as changes in our interpretations and assumptions in applying the Tax Reform, could materially impact our cash tax liabilities and results of operations.

Customer and Counterparty Credit and Liquidity Risk

Our operations expose us to credit risk of default of our ~~customers~~clients and counterparties. The risk includes liquidity risk to the extent our ~~customers~~clients or counterparties are unable to make timely payment of margin or other credit support. These risks expose us indirectly to the financing and liquidity risks of our ~~customers~~clients and counterparties, including the risks that our ~~customers~~clients and counterparties may not be able to finance their operations.

As a clearing broker, we act on behalf of our ~~customers~~clients for all trades consummated on exchanges. We must pay initial and variation margin to the exchanges, on a net basis, before we receive the required payments from our ~~customers.~~clients. Accordingly, we are responsible for our ~~customers’~~clients’ obligations with respect to these transactions, which exposes us to significant credit risk. Our ~~customers~~clients are required to make any required margin deposits the next business day, and we require our largest ~~customers~~clients to make intra-day margin payments during periods of significant price movement. Our ~~customers~~clients are required to maintain initial margin requirements at the level set by the respective exchanges, but we have the ability to increase the margin requirements for ~~customers~~clients based on their open positions, trading activity, or market conditions.

With OTC derivative transactions, we act as a principal, which exposes us to the credit risk of both our ~~customers~~clients and the counterparties with which we offset our ~~customer~~client positions. As with exchange-traded transactions, our OTC transactions require that we meet initial and variation margin payments on behalf of our ~~customers~~clients before we receive the required payment from our ~~customers.~~clients. OTC ~~customers~~clients are required to post sufficient collateral to meet margin requirements based on Value-at-Risk models as well as variation margin requirement based on the price movement of the commodity or security in which they transact. Our ~~customers~~clients are required to make any required margin deposits the next business day, and we may require our largest ~~customers~~clients to make intra-day margin payments during periods of significant price movement. We have the ability to increase the margin requirements for ~~customers~~clients based on their open positions, trading activity, or market conditions. On a limited basis, we provide credit thresholds to certain ~~customers,~~clients, based on internal evaluations and monitoring of ~~customer~~client creditworthiness.

In addition, with OTC transactions, we are at risk that a counterparty will fail to meet its obligations when due. We would then be exposed to the risk that the settlement of a transaction which is due a ~~customer~~client will not be collected from the respective counterparty with which the transaction was offset. We continuously monitor the credit quality of our respective counterparties and mark our positions held with each counterparty to market on a daily basis.

We enter into securities purchased under agreements to resell, securities sold under agreements to repurchase, securities borrowed and securities loaned transactions to, among other things, finance financial instruments, acquire securities to cover short positions, acquire securities for settlement, and to accommodate counterparties’ needs. In connection with these agreements and transactions, it is our policy to receive or pledge cash or securities to adequately collateralize such agreements

and transactions in accordance with general industry guidelines and practices. The value of the collateral is valued daily and we may require counterparties to deposit additional collateral or return collateral pledged, when appropriate.

In our Physical Commodities business we act as a principal, which exposes us to the credit risk of both our ~~customers~~clients and our suppliers with which we offset our ~~customer~~client positions as well as provide financing to commercial commodity-related companies against physical inventories. We mitigate this risk by securing warehouse receipts and or insurance against potential default by either party.

Information related to bad debt expense for the ~~three and nine~~six months ended ~~June 30,~~March 31, 2019 and 2018 ~~and 2017~~ can be found in Note 56 of the Condensed Consolidated Financial Statements.

Primary Sources and Uses of Cash

Our assets and liabilities may vary significantly from period to period due to changing ~~customer~~client requirements, economic and market conditions and our growth. Our total assets as of ~~June~~March 31, 2019 and September 30, 2018, were $9.4 billion and ~~September 30, 2017, were~~ ~~$7.3 billion~~ ~~and $6.2~~$7.8 billion, respectively. Our operating activities generate or utilize cash as a result of net income or loss earned or incurred during each period and fluctuations in our assets and liabilities. The most significant fluctuations arise from changes in the level of ~~customer~~

client activity, commodities prices and changes in the balances of financial instruments and commodities inventory. INTL FCStone Financial and INTL FCStone Ltd occasionally utilize their margin line credit facilities, on a short-term basis, to meet intraday settlements with the commodity exchanges prior to collecting margin funds from their ~~customers.~~clients.

The majority of the assets of INTL FCStone Financial and INTL FCStone Ltd are restricted from being transferred to its parent or other affiliates due to specific regulatory requirements. This restriction has no impact on our ability to meet our cash obligations, and no impact is expected in the future.

We have liquidity and funding policies and processes in place that are intended to maintain significant flexibility to address both company-specific and industry liquidity needs. ~~The~~Typically, the majority of our excess funds are held with high quality institutions, under highly-liquid reverse repurchase agreements, U.S. government obligations, interest earning cash deposits and AA-rated money market investments. ~~We do not hold any direct investments in the general obligations of any sovereign nations.~~

As of ~~June 30, 2018,~~March 31, 2019, we had ~~$277.2~~$378.8 million in undistributed foreign earnings. AsThe Company recognized the one-time U.S. repatriation tax due under Tax Reform and, as a result, repatriation of these amounts is not subject to additional U.S. federal income tax but would be subject to applicable withholding taxes in the relevant jurisdictions. The Company does not intend to distribute earnings in a taxable manner, and therefore intends to limit distributions to earnings previously taxed in the U.S., or earnings that would qualify for the 100 percent dividends received deduction provided for in the Tax Reform Act, and earnings that would not result in any significant foreign taxes. The Company has repatriated $13.0 million during fiscal 2019 of earnings previously taxed in the U.S. resulting in no significant taxes. Therefore, the Company ~~now~~ has not recognized a deferred tax liability on its investment in foreign subsidiaries.

On February 22, 2019, the ~~ability~~Company amended its existing $262.0 million senior secured revolving credit facility, to ~~repatriate these funds tax free. While~~extend the ~~majority~~maturity date through February 2022 and to increase the size of ~~these undistributed earnings have been reinvested in~~the facility to $350.0 million. The amended facility is comprised of a $175.0 million revolving credit facility and a $175.0 million Term Loan. This credit facility will continue to be used to finance the Company’s working capital requirements and capital expenditures. The credit facility is secured by a first priority lien on substantially all of the assets of the Company and those of our ~~foreign regulated~~ subsidiaries ~~in particular our London-based subsidiary INTL FCStone Ltd, we intend~~that guarantee the credit facility. The Company is required to ~~repatriate available funds~~make quarterly principal payments against the Term Loan equal to ~~our U.S. operations which will~~1.25% of the original balance with the remaining balance due on the maturity date. Amounts repaid on the Term Loan may not be ~~placed into our central treasury, and available for funding.~~reborrowed.

As of ~~June 30, 2018, $31.1 million of financial instruments owned and $31.2 million of financial instruments sold, not yet purchased, are exchangeable foreign equities, ADRs and GDRs.~~

~~As of~~ ~~June 30, 2018~~,March 31, 2019, we had four committed bank credit facilities, totaling ~~$594.5~~$707.5 million, of which ~~$311.2~~$426.3 million was outstanding. Additional information regarding our bank credit facilities can be found in Note 910 of the Condensed Consolidated Financial Statements. The credit facilities include:

A three-year syndicated loan facility, which includes a revolving credit facility and a Term Loan, committed until ~~March 18, 2019,~~February 22, 2022, under which ~~INTL FCStone Inc. is~~we are entitled to borrow up to ~~$262.0~~$347.8 million, subject to certain terms and conditions of the credit agreement. The loan proceeds are used to finance our working capital needs of us and certain subsidiaries. The agreement contains financial covenants related to consolidated tangible net worth, consolidated funded debt to net worth ratio, consolidated fixed charge coverage ratio and consolidated net unencumbered liquid assets, as defined.

An unsecured syndicated loan facility, committed until April ~~4, 2019,~~3, 2020, under which our subsidiary, INTL FCStone Financial is entitled to borrow up to $75.0 million, subject to certain terms and conditions of the credit agreement. This facility is intended to provide short-term funding of margin to commodity exchanges as necessary.

A syndicated loan facility, committed until November 1, 2019, under which our subsidiary, FCStone Merchant Services, LLC is entitled to borrow up to $232.5 million, subject to certain terms and conditions of the credit agreement. The loan proceeds are used to finance traditional commodity financing arrangements and commodity repurchase agreements.

An unsecured syndicated loan facility, committed until ~~November 7, 2018,~~January 31, 2020, under which our subsidiary, INTL FCStone Ltd is entitled to borrow up to ~~$25.0~~$50.0 million, subject to certain terms and conditions of the credit agreement. This facility is intended to provide short-term funding of margin to commodity exchanges as necessary.

As reflected above, ~~$362.0~~$357.5 million of our committed credit facilities are scheduled to expire ~~within twelve months~~during the 12-month period beginning with the filing date of this ~~filing.~~Quarterly Report on Form 10-Q. We intend to renew or replace these facilities as they expire, and based on our liquidity position and capital structure, we believe we will be able to do so.

~~Additionally,~~As of March 31, 2019, we ~~have a~~had five uncommitted bank credit facilities with an outstanding balance $1.5 million. The credit facilities include:

A secured uncommitted loan facility under which ~~our subsidiary,~~ INTL FCStone Financial may borrow up to $75.0 million, collateralized by commodities warehouse receipts, to facilitate U.S. commodity exchange deliveries of its ~~customers,~~clients, subject to certain terms and conditions of the credit agreement.

~~We also have a~~A secured uncommitted loan facility under which ~~our subsidiary,~~ INTL FCStone ~~Ltd~~Financial may borrow up to ~~approximately $25.0~~$100.0 million ~~collateralized by commodities warehouse receipts, to facilitate financing~~for short term funding of ~~commodities under repurchases agreement services to its customers,~~firm and client margin requirements, subject to certain terms and conditions of the ~~credit~~ agreement. The borrowings are secured by first liens on firm owned marketable securities or client owned securities which have been pledged to us under a clearing arrangement.

~~We also have a~~A secured uncommitted loan facility under which ~~our subsidiary,~~ INTL FCStone Financial may borrow requested amounts for short term funding of firm and ~~customer~~client margin requirements. The uncommitted maximum amount available to be borrowed is not specified, and all requests for borrowing are subject to the sole discretion of the lender. The ~~borrowings~~borrowing are secured by first liens on firm owned marketable securities or ~~customer~~client owned securities which have been pledged to us under a clearing arrangement.

~~In addition, we have a~~A secured uncommitted loan facility under which ~~our subsidiary~~ INTL FCStone ~~Financial~~Ltd may borrow up to ~~$100.0~~£20.0 million, ~~for short term funding~~collateralized by commodities warehouse receipts, to facilitate financing of ~~firm~~commodities under repurchase agreement services to its clients, subject to certain terms and ~~customer margin requirements. The borrowings are~~conditions of the credit agreement.

A secured uncommitted loan facility under which FCStone Merchant Services, LLC may borrow up to $20.0 million, collateralized by a first ~~liens on firm owned marketable securities~~priority security interest in the goods and inventory of FCStone Merchant Services, LLC that is either located outside of the U.S. and Canada or ~~customer owned securities which have been pledged~~in transit to ~~us under~~ a ~~clearing arrangement.~~destination outside the U.S. or Canada, to facilitate the financing of inventory of commodities and other products or goods approved by the lender in its sole discretion, subject to certain terms and conditions of the loan facility agreement.

Our facility agreements contain certain financial covenants relating to financial measures on a consolidated basis, as well as on a certain stand-alone subsidiary basis, including minimum tangible net worth, minimum regulatory capital, minimum net unencumbered liquid assets, maximum net loss, minimum fixed charge coverage ratio and maximum funded debt to net worth ratio. Failure to comply with any such covenants could result in the debt becoming payable on demand. As of ~~June 30, 2018,~~March 31, 2019, we and our subsidiaries are in compliance with all of our financial covenants under the outstanding facilities.

In accordance with required disclosure as part of our three-year syndicated revolving loan facility, during the trailing twelve months ended March 31, 2019, interest expense directly attributable to trading activities includes $57.2 million in connection with trading activities conducted as an institutional dealer in fixed income securities, and $22.7 million in connection with securities lending activities.

Other Capital Considerations

Our activities are subject to various significant governmental regulations and capital adequacy requirements, both in the U.S. and ~~in the international jurisdictions in which we operate.~~overseas. Certain of our other non-U.S. subsidiaries are also subject to capital adequacy requirements promulgated by authorities of the countries in which they operate.

Our subsidiaries are in compliance with all of their capital regulatory requirements as of ~~June 30, 2018~~.March 31, 2019. Additional information on these net capital and minimum net capital requirements can be found in Note 1213 of the Condensed Consolidated Financial Statements.

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); the trading of clearable derivatives on swap execution facilities or exchanges; and registration and comprehensive regulation of new categories of market participants as “swap dealers” and swap “introducing brokers.” Our subsidiary, INTL FCStone Markets, LLC, is a provisionally registered swap dealer. ~~Some important rules, such as those setting capital and margin requirements,have not been finalized or fully implemented, and it is too early~~We will continue to ~~predict with any degree~~monitor all applicable developments in the ongoing implementation of ~~certainty how we will be affected.~~the Dodd-Frank Act.

Cash Flows

Following the adoption of Accounting Standards Update (“ASU”) 2016-18 on October 1, 2018, we now include client cash and securities segregated for regulatory purposes in our consolidated cash flow statements. We hold a significant amount of U.S. Treasury obligations which represent investment of client funds or client-owned investments pledged in lieu of cash margin. U.S. Treasury securities held with third-party banks or pledged with exchange-clearing organizations representing investments of client funds or which are held for particular clients in lieu of cash margin are included in the beginning and ending cash balances reconciled on our consolidated cash flow statements to the extent that they have an original maturity of 90 days or less and, therefore, meet the definition of a cash equivalent. Purchases and sales of U.S. Treasury securities representing investment of clients’ funds and U.S. Treasury securities pledged or redeemed by particular clients in lieu of cash margin are presented as operating uses and sources of cash, respectively, within the operating section of the cash flow statement if they have an original maturity of greater than 90 days. Typically, there is an offsetting use or source of cash related to the change in the payable to the client. However, we will report a use of cash in periods where segregated U.S. Treasury securities mature and are replaced with U.S. Treasury securities which have original maturities greater than 90 days.

Our cash and cash equivalents ~~increase~~ddecreased from ~~$314.9~~$2,190.1 million as of September 30, ~~2017~~2018 to ~~$347.8~~$2,110.4 million as of ~~June 30, 2018~~,March 31, 2019, a net ~~increase~~decrease of ~~$32.9 million~~.$79.7 million. Net cash of ~~$87.1~~$136.9 million was used in operating activities, ~~$9.3~~$15.1 million was used in investing activities and net cash of ~~$126.3~~$72.0 million was provided by financing activities, of which ~~$131.0~~$175.0 million was borrowed from the amendment of our credit facility and the related issuance of the senior secured term loan, partially offset by net payments on our revolving lines of credit ~~and~~ ~~increase~~dof $98.0 million, which decreased the amounts payable to lenders under loans. Fluctuations in exchange rates ~~increase~~dincreased our cash and cash equivalents by ~~$3.0 million~~.$0.3 million.

In the ~~commodities~~broker-dealer industry, companies report trading activities in the operating section of the statement of cash flows. Due to the daily price volatility in the ~~commodities market,~~markets, as well as changes in margin requirements, fluctuations in the balances of deposits held at various exchanges that are not subject to segregation requirements, marketable securities and ~~customer~~client commodity accounts may occur from day-to-day. A use of cash, as calculated on the consolidated statement of cash flows, includes unrestricted cash transferred and pledged to the exchanges or guarantee ~~funds.~~funds that is not subject to regulatory segregation requirements. These funds are held in interest-bearing deposit accounts at the exchanges, and based on daily exchange requirements, may be withdrawn and returned to unrestricted cash. Additionally, in our unregulated OTC and foreign exchange operations which are not subject to segregation requirements, cash deposits received from ~~customers~~clients are reflected as cash provided from operations. Subsequent transfer of these cash deposits to counterparties or exchanges to margin their open positions will be reflected as an operating use of cash to the extent the transfer occurs in a different period than the cash deposit was received.

We continuously evaluate opportunities to expand our business. Investing activities include ~~$9.3~~$7.3 million in capital expenditures for property ~~plant~~ and equipment in the ~~current nine months ended~~second quarter compared to ~~$8.6~~$6.9 million in the prior year. Fluctuations in capital expenditures are primarily due to the timing of purchases of IT equipment and trade system software as well as the timing on leasehold improvement projects. Investing activities also include $7.8 million in cash payments, net of cash received, for the acquisition of businesses in the second quarter compared to zero in the prior year. Further information about business acquisitions is contained in Note 17 of the Condensed Consolidated Financial Statements.

Apart from what has been disclosed above, there are no known trends, events or uncertainties that have had or are likely to have a material impact on our liquidity, financial condition and capital resources. Based upon our current operations, we

believe that cash flows from operations, available cash and available borrowings under our credit facilities will be adequate to meet our future liquidity needs.

Commitments

Information about our commitments and contingent liabilities is contained in Note 1112 of the Condensed Consolidated Financial Statements.

Off Balance Sheet Arrangements

We are party to certain financial instruments with off-balance sheet risk in the normal course of business as a registered securities broker-dealer, futures commission merchant, U.K. based ~~Financial Services Firm,~~financial services firm, provisionally registered swap dealer and from our market-making and proprietary trading in the foreign exchange and commodities trading activities. These financial instruments include futures, forward and foreign exchange contracts, exchange-traded and OTC options, mortgage-backed ~~TBAs,~~To Be Announced (“TBA”) securities and interest rate swaps. Derivative financial instruments involve varying degrees of ~~off-statement of financial condition~~off-balance sheet market risk whereby changes in the fair values of underlying financial instruments may result in changes in the fair value of the financial instruments in excess of the amounts reflected in the ~~statement of financial condition.~~balance sheet. Exposure to market risk is influenced by a number of factors, including the relationships between the financial instruments and our positions, as well as the volatility and liquidity in the markets in which the financial instruments are traded. The principal risk components of financial instruments include, among other things, interest rate volatility, the duration of the underlying instruments and

changes in commodity pricing and foreign exchange rates. We attempt to manage our exposure to market risk through various techniques. Aggregate market limits have been established and market risk measures are routinely monitored against these limits. Derivative contracts are traded along with cash transactions because of the integrated nature of the markets for such products. We manage the risks associated with derivatives on an aggregate basis along with the risks associated with our proprietary trading and market-making activities in cash instruments as part of our firm-wide risk management policies.

A significant portion of these instruments are primarily the execution of orders for commodity futures and options on futures contracts on behalf of our clients, substantially all of which are transacted on a margin basis. Such transactions may expose us to significant credit risk in the event margin requirements are not sufficient to fully cover losses which clients may incur. We control the risks associated with these transactions by requiring clients to maintain margin deposits in compliance with individual exchange regulations and internal guidelines. We monitor required margin levels daily and, therefore, may require clients to deposit additional collateral or reduce positions when necessary. We also establish contract limits for clients, which are monitored daily. We evaluate each client’s creditworthiness on a case-by-case basis. Clearing, financing, and settlement activities may require us to maintain funds with or pledge securities as collateral with other financial institutions. Generally, these exposures to exchanges are subject to netting of open positions and collateral, while exposures to clients are subject to netting, per the terms of the client agreements, which reduce the exposure to us by permitting receivables and payables with such clients to be offset in the event of a client default. Management believes that the margin deposits held as of March 31, 2019 are adequate to minimize the risk of material loss that could be created by positions held at that time. Additionally, we monitor collateral fair value on a daily basis and adjust collateral levels in the event of excess market exposure. Generally, these exposures to both counterparties and clients are subject to master netting agreements and the terms of the client agreements, which reduce our exposure.

As a broker-dealer in U.S. Treasury obligations, U.S. government agency obligations, agency mortgage-backed obligations, and asset-backed obligations, we are engaged in various securities trading, borrowing and lending activities servicing solely institutional counterparties. Our exposure to credit risk associated with the nonperformance of counterparties in fulfilling their contractual obligations pursuant to these securities transactions and market risk associated with the sale of securities not yet purchased can be directly impacted by volatile trading markets which may impair their ability to satisfy outstanding obligations to us. In the event of non-performance and unfavorable market price movements, we may be required to purchase or sell financial instruments, which may result in a loss to us.

We transact OTC and foreign exchange contracts with our clients, and our OTC and foreign exchange trade desks will generally offset the client’s transaction simultaneously with one of our trading counterparties or will offset that transaction with a similar, but not identical, position on the exchange. These unmatched transactions are intended to be short-term in nature and are conducted to facilitate the most effective transaction for our client.

Additionally, we hold options and futures on options contracts resulting from market-making and proprietary trading activities in these product lines. We assist clients in our commodities trading business to protect the value of their future production (precious or base metals) by selling them put options on an OTC basis. We also provide our physical commodities trading business clients with sophisticated option products, including combinations of buying and selling puts and calls. We mitigate our risk by effecting offsetting options with market counterparties or through the purchase or sale of exchange-traded commodities futures.

As part of the activities discussed above, we carry short positions. We sell financial instruments that we do not own, borrow the financial instruments to make good delivery, and therefore are obliged to purchase such financial instruments at a future date in order to return the borrowed financial instruments. We ~~recorded~~record these obligations in the condensed consolidated financial statements as of ~~June~~March 31, 2019 and September 30, 2018, ~~and~~ ~~September 30, 2017~~, at fair value of the related financial instruments, totaling ~~$1,007.2~~$956.7 million and ~~$717.6~~$866.5 million,, respectively. These positions are held to offset the risks related to financial assets owned, and reported in our condensed consolidated balance sheets in ‘financial instruments owned, at fair value’, and ‘physical commodities inventory, net’. We will incur losses if the fair value of the financial instruments sold, not yet purchased, increases subsequent to ~~June 30, 2018~~,March 31, 2019, which might be partially or wholly offset by gains in the value of assets held as of ~~June 30, 2018~~.March 31, 2019. The totals of ~~$1,007.2~~$956.7 million and ~~$717.6~~$866.5 million include a net liability of ~~$305.8~~$201.4 million and ~~$317.0 million~~$193.4 for derivatives, based on their fair value as of ~~June~~March 31, 2019 and September 30, 2018, respectively.

We do not anticipate non-performance by counterparties in the above situations. We have a policy of reviewing the credit standing of each counterparty with which we conduct business. We have credit guidelines that limit our current and potential credit exposure to any one counterparty. We administer limits, monitor credit exposure, and periodically review the financial soundness of counterparties. We manage the credit exposure relating to our trading activities in various ways, including entering into collateral arrangements and limiting the duration of exposure. Risk is mitigated in certain cases by closing out transactions and entering into risk reducing transactions.

We are a member of various exchanges that trade and clear futures and option contracts. We are also a member of and provide guarantees to securities clearinghouses and exchanges in connection with client trading activities. Associated with our

memberships, we may be required to pay a proportionate share of the financial obligations of another member who may default on its obligations to the exchanges. While the rules governing different exchange memberships vary, in general our guarantee obligations would arise only if the exchange had previously exhausted its resources. In addition, any such guarantee obligation would be apportioned among the other non-defaulting members of the exchange. Our liability under these arrangements is not quantifiable and could exceed the cash and securities we have posted as collateral at the exchanges. However, management believes that the potential for us to be required to make payments under these arrangements is remote. Accordingly, no contingent liability for these arrangements has been recorded in the condensed consolidated balance sheets as of March 31, 2019 and September 30, ~~2017, respectively.~~

Except as discussed above, there have been no material changes to the off balance sheet arrangements discussed in the Management’s Discussion and Analysis of our Annual Report on Form 10-K for the fiscal year ended September 30, 2017.2018.

Effects of Inflation

Because our assets are, to a large extent, liquid in nature, they are not significantly affected by inflation. Increases in our expenses, such as compensation and benefits, transaction-based clearing expenses, occupancy and equipment rental, due to inflation, may not be readily recoverable from increasing the prices of our services. While rising interest rates are generally favorable for us, to the extent that inflation has other adverse effects on the financial markets and on the value of the financial instruments held in inventory, it may adversely affect our financial position and results of operations.

Critical Accounting Policies

See our critical accounting policies discussed in the Management’s Discussion and Analysis of the most recent annual report filed on Form 10-K. There have been no material changes to these policies.

Accounting Development Updates

In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2014-09, Revenue from Contracts with Customers (Topic 606). ASU 2014-09 completes the joint effort by the FASB and International Accounting Standards Board (IASB) to improve financial reporting by creating common revenue recognition guidance for GAAP and International Financial Reporting Standards (IFRS). In March 2016, the FASB issued ASU 2016-08, “Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations (Reporting Revenue Gross versus Net).” ASU 2016-08 clarifies the implementation guidance on principal versus agent considerations. In April 2016, the FASB issued ASU 2016-10, “Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing.” ASU 2016-10 clarifies the implementation guidance on identifying performance obligations. These ASUs apply to all companies that

enter into contracts with customers to transfer goods or services. These ASUs are effective for public entities for interim and annual reporting periods beginning after December 15, 2017. Early adoption is permitted only as of annual reporting periods beginning after December 15, 2016, including interim periods within that reporting period. The Company expects to adopt this guidance starting with the first quarter of fiscal year 2019. Entities have the choice to apply these ASUs either retrospectively to each reporting period presented or by recognizing the cumulative effect of applying these standards at the date of initial application and not adjusting comparative information. The Company plans to adopt the new standard using the modified retrospective method which will result in a cumulative effect adjustment as of the date of adoption. By selecting this adoption method, the Company will disclose the amount, if any, by which each financial statement line item is affected by the standard in the current reporting period compared with the guidance that was in effect before adoption. Our implementation efforts include identifying revenues and costs within the scope of the ASU, reviewing contracts, and analyzing any changes to its existing revenue recognition policies. As a result of the initial evaluation performed, the Company does not expect that there will be material changes to the timing of revenue, but do anticipate certain changes to the classification of revenue in the consolidated income statements. The Company also expects additional disclosures to be provided in our consolidated financial statements after adoption of the new standard. The Company is continuing to assess the impact of the new standard as we progress through the implementation process and as industry interpretations are resolved.

In February 2016, the FASB issued ASU No. 2016-02, ~~Leases~~“Leases (Topic 842)”, which supersedes ASC 840, Leases. ~~The Company~~We will adopt this guidance starting with the first quarter of fiscal year 2020 using a modified retrospective transition approach. This accounting update will require the Company as a lessee to recognize on the consolidated balance sheet all leases with terms exceeding one year, which results in the recognition of a right of use asset and corresponding lease liability, including for those leases that we currently classify as operating leases. The right of use asset and lease liability will initially be measured using the present value of the remaining rental payments.

In ~~February~~July 2018, the FASB issued ASU No. ~~2018-02, Income Statement - Reporting Comprehensive Income~~2018-10, “Codification Improvements to Topic 842, Leases” and ASU No. 2018-11, “Leases (Topic ~~220): Reclassification~~842) Targeted Improvements”. ASU 2018-10 provides certain amendments that affect narrow aspects of ~~Certain Tax Effects from Accumulated Other Comprehensive Income. The~~the guidance issued in ASU ~~provides that~~2016-02. ASU 2018-11 allows all entities adopting ASU 2016-02 to choose an additional (and optional) transition method of adoption, under which an entity initially applies the ~~stranded tax effects from~~new leases standard at the ~~Tax Reform on~~adoption date and recognizes a cumulative-effect adjustment to the opening balance of ~~other comprehensive~~retained earnings ~~may be reclassified to retained earnings.~~in the period of adoption. We are in the process of identifying the population of leases affected by the guidance and evaluating the impact ASU 2016-02 will have on our consolidated financial statements and related disclosures.

In June 2016, the FASB issued ASU 2016-13, Measurement of Credit Losses on Financial Instruments, which significantly changes the ways entities recognize credit losses on financial instruments. The ~~ASU~~guidance is effective for public business entities for annual and interim periods in fiscal years beginning after December 15, ~~2018,~~2019, with ~~an election to adopt early.~~early adoption permitted in annual and interim periods in fiscal years beginning after December 15, 2018. The Company expects to adopt this guidance starting with the first quarter of fiscal year ~~2020.~~2021. The guidance introduces a new credit reserving model known as the Current Expected Credit Loss (“CECL”) model, which is based on expected losses, and differs significantly from the incurred loss approach used today. The CECL model requires measurement of expected credit losses not only based on historical experience and current conditions, but also by including reasonable and supportable forecasts incorporating forward-looking information and will likely result in earlier recognition of credit reserves. The Company ~~does not expect~~is currently in the ~~adoption~~process of establishing a cross-functional team to assess the required changes to our credit loss methodologies and systems, as well as determine additional data and resources required to comply with the new guidance. We are evaluating the impact that this ~~ASU to~~new guidance will have ~~a material impact~~ on our ~~consolidated~~ financial ~~statements.~~

position and results of operations, which will depend on, among other things, the current and expected macroeconomic conditions and the nature and characteristics of financial assets held by us on the date of adoption.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

Credit Risk

See Note 45 to the Condensed Consolidated Financial Statements, ‘Financial Instruments with Off-Balance Sheet Risk and Concentrations of Credit Risk’.

Market Risk

We conduct our market-making and trading activities predominantly as a principal, which subjects our capital to significant risks. These risks include, but are not limited to, absolute and relative price movements, price volatility and changes in liquidity, over which we have virtually no control. Our exposure to market risk varies in accordance with the volume of ~~customer-driven~~client-driven market-making transactions, the size of the proprietary positions and the volatility of the financial instruments traded.

We seek to mitigate exposure to market risk by utilizing a variety of qualitative and quantitative techniques:

Diversification of business activities and instruments;

Limitations on positions;

Allocation of capital and limits based on estimated weighted risks; and

Daily monitoring of positions and mark-to-market profitability.

We utilize derivative products in a trading capacity as a dealer to satisfy ~~customer~~client needs and mitigate risk. We manage risks from both derivatives and non-derivative cash instruments on a consolidated basis. The risks of derivatives should not be viewed in isolation, but in aggregate with our other trading activities.

Management believes that the volatility of revenues is a key indicator of the effectiveness of our risk management techniques. The graph below summarizes volatility of our daily revenue, determined on a marked-to-market basis, during the ~~nine~~six months ended ~~June 30, 2018~~.March 31, 2019.

In our Securities market-making and trading activities, we maintain inventories of equity and debt securities. In our Physical Commodities segment, our positions include physical inventories, forwards, futures and options on futures, and OTC derivatives. Our commodity trading activities are managed as one consolidated book for each commodity encompassing both cash positions and derivative instruments. We monitor the aggregate position for each commodity in equivalent physical ounces, metric tons or other relevant unit.

Interest Rate Risk

In the ordinary course of our operations, we have interest rate risk from the possibility that changes in interest rates will affect the values of financial instruments and impact interest income earned. Within our domestic institutional dealer in fixed income securities business, we maintain a significant amount of trading assets and liabilities which are sensitive to changes in interest rates. These trading activities consists primarily of securities trading in connection with U.S. Treasury, U.S. government agency, agency mortgage-backed and agency asset-backed ~~obligations.~~obligations as well as investment grade, high-yield, convertible and emerging market debt securities. Derivative instruments, which consist of futures, mortgage-backed “to be announced” (TBA) securities and forward settling transactions, are used to manage risk exposures in the trading inventory. We enter into TBA securities transactions for the sole purpose of managing risk associated with the purchase of mortgage pass-through securities.

In addition, we generate interest income from the positive spread earned on ~~customer~~client deposits. We typically invest in U.S. Treasury bills, notes, and obligations issued by government sponsored entities, reverse repurchase agreements involving U.S. Treasury bills and government obligations or AA-rated money market funds. In some instances, we maintain interest earning cash deposits with banks, clearing organizations and counterparties. We have an investment policy which establishes acceptable standards of credit quality and limits the amount of funds that can be invested within a particular fund, institution, clearing organization and counterparty.

We employ an interest rate management strategy, where we use derivative financial instruments in the form of interest rate swaps and/or outright purchases of medium-term U.S. Treasury notes to manage a portion of our aggregate interest rate position. On a quarterly basis, we evaluate our overall level of short term investable balances, net of our of variable rate debt, and either invest a portion of these investable balances in medium-term U.S. Treasury notes or enter into interest rate swaps, when a sufficient interest rate spread between short-term and medium-term rates exists. Under this strategy, we do not actively trade in such instruments and generally intend to hold these investment to their maturity date. Under this strategy, excluding cash deposits and our investments in AA-rated money market funds, the weighted average time to maturity of our portfolio is not to exceed 24 months in duration.

Currently we hold no U.S. Treasury notes or interest rate swap derivative contracts as part of this strategy. For the three and nine months ended June 30, 2018, operating revenues include no unrealized gains or losses on the fair value of U.S. Treasury notes and interest rate swaps while the three and nine months ended June 30, 2017, include unrealized losses of $0.0 million and $5.8 million, respectively, related to the change in fair value of these U.S. Treasury notes and interest rate swaps. The U.S. Treasury notes and interest rate swaps were not designated for hedge accounting treatment, and changes in their fair values, which are volatile and can fluctuate from period to period, were included in operating revenues in the current periods.

Currently our short term investment balances are held in short term U.S. Treasury bills, interest earning cash deposits and AA-rated money market fund investments. The weighted-average time to maturity of the portfolio, excluding cash deposits and our investments in AA-rated money market funds, is less than three months.

We manage interest expense using a combination of variable and fixed rate debt as well as including the average outstanding borrowings in our calculations of the notional value of interest rate swaps to be entered into as part of our interest rate management strategy discussed above. The debt instruments are carried at their unpaid principal balance which approximates fair value. At ~~June 30, 2018~~, ~~$359.2~~March 31, 2019, $427.8 million of our debt was variable-rate debt. We are subject to earnings and liquidity risks for changes in the interest rate on this debt. As of ~~June 30, 2018~~,March 31, 2019, we had ~~$1.4~~$0.8 million outstanding in fixed-rate long-term debt. There are no earnings or liquidity risks associated with our fixed-rate debt.

~~Highly Inflationary Economy~~

At June 30, 2018, we have wholly owned subsidiaries in Argentina which employ approximately 80 people, and primarily conduct debt trading and asset management business activities for customers. The Argentinian economy was recently determined to be highly inflationary. A highly inflationary economy is one where the cumulative inflation rate for the three years preceding the beginning of the reporting period, including interim reporting periods, is in excess of 100 percent. Argentina’s inflation rate reached this threshold with the quarterly period ended June 30, 2018. For the interim periods ended June 30, 2018, the functional currency for certain of our subsidiaries is the Argentinian peso, the local currency of these subsidiaries. In accordance with this designation, we will report the financial results of the subsidiaries in Argentina at the functional currency of its parent, which is the U.S. dollar, effective July 1, 2018.

Item 4. Controls and Procedures

In connection with the filing of this Form 10-Q, our management, including the Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of ~~June 30, 2018~~.March 31, 2019. Our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures were effective as of ~~June 30, 2018~~.March 31, 2019.

There are limitations inherent in any internal control, such as the possibility of human error and the circumvention or overriding of controls. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met, and may not prevent or detect misstatements. As conditions change over time, so too may the effectiveness of internal controls. As a result, there can be no assurance that a control system will succeed in preventing all possible instances of error and fraud. Our disclosure controls and procedures are designed to provide reasonable assurance of achieving their objectives, and the conclusions our Chief Executive Officer and Chief Financial Officer are made at the “reasonable assurance” level.

There were no changes in our internal controls over financial reporting during the quarter ended ~~June 30, 2018~~March 31, 2019 that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II

Item 1. Legal Proceedings

From time to time and in the ordinary course of business, we are involved in various legal and regulatory actions and proceedings, including tort claims, contractual disputes, employment matters, workers’ compensation claims and collections. We carry insurance that provides protection against certain types of claims, up to the policy limits of our insurance.

~~The following is a summary~~There have been no material changes to our disclosures included in Item 3. Legal Proceedings of ~~a significant legal matter.~~

~~Sentinel Litigation~~

~~Prior to the July 1, 2015 merger into INTL FCStone Financial,~~ our subsidiary, FCStone, LLC, had a portion of its excess segregated funds invested with Sentinel Management Group Inc. (“Sentinel”), a registered futures commission merchant (“FCM”) and an Illinois-based money manager that provided cash management services to other FCMs. In August 2007,

Sentinel halted redemptions to customers and sold certain of the assets it managed to an unaffiliated third party at a significant discount. On August 17, 2007, subsequent to Sentinel’s sale of certain assets, Sentinel filed for bankruptcy protection. In aggregate, $15.5 million of FCStone, LLC’s $21.9 million in invested funds were returned to it before and after Sentinel’s bankruptcy petition. A further amount of $2.0 million was held by the bankruptcy trustee in reserve in the name of FCStone, LLC.

~~On April 23, 2018, following ten years of legal proceedings and a final ruling by the United States Court of Appeals~~Annual Report on Form 10-K for the Seventh Circuit against the trustee and in favor of INTL FCStone Financial, the United States Supreme Court denied the trustee’s petition for writ of certiorari. Following this, on May 1, 2018, INTL FCStone Financial received funds from the reserve account in the amount of $2.0 million. This amount is presented in ‘other gain’ in the condensed consolidated income statement.

Our assessments are based on estimates and assumptions that have been deemed reasonable by management, but that may later prove to be incomplete or inaccurate, and unanticipated events and circumstances may occur that might cause us to change those estimates and assumptions.fiscal year ended September 30, 2018.

Item 1A. Risk Factors

In addition to the other information set forth in this report, information regarding risks affecting us appears in Part I, Item 1A of our Annual Report on Form 10-K for the fiscal year ended September 30, ~~2017.~~2018. These are not the only risks we face. Additional risks and uncertainties not currently known to us or that management currently considers to be non-material may in the future adversely affect our business, financial condition and operating results. There have been no material changes to our risk factors since the filing of our Form 10-K.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

On ~~August 17, 2017, our Board of Directors authorized for fiscal year~~September 30, 2018, the previously authorized repurchase of up to 1.0 million shares of our outstanding common stock from time to time in open market purchase and private transactions ~~commencing on October 1, 2017 and ending on September 30, 2018,~~expired. As of the date of this filing, no additional authorization by our Board of Directors has occurred. Previously approved plans were subject to the discretion of the senior management team to implement our stock repurchase plan, and subject to market conditions and as permitted by securities laws and other legal, regulatory and contractual requirements and covenants.

Our common stock repurchase program activity for the three months ended ~~June 30, 2018~~March 31, 2019 was as follows.



Period	Total Number of Shares ~~Purchased~~Purchased(1)	Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Program	Maximum Number of Shares Remaining to be Purchased Under the Program
~~April~~January 1, ~~2018~~2019 to ~~April 30, 2018~~January 31, 2019	—	$	—	—	1,000,000
~~May~~February 1, ~~2018~~2019 to ~~May 31, 2018~~February 28, 2019	—	—		—	1,000,000
~~June~~March 1, ~~2018~~2019 to ~~June 30, 2018~~March 31, 2019	—	—		—	1,000,000
Total	—	$	—	—

Item 6. Exhibits



31.1		Certification of Chief Executive Officer, pursuant to Rule 13a—14(a).

31.2		Certification of Chief Financial Officer, pursuant to Rule 13a—14(a).

32.1		Certification of Chief Executive Officer, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2		Certification of Chief Financial Officer, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

Signatures

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

INTL FCStone Inc.



Date:	~~August 6, 2018~~May 8, 2019	/s/ Sean M. O’Connor
		Sean M. O’Connor
		Chief Executive Officer

Date:	~~August 6, 2018~~May 8, 2019	/s/ William J. Dunaway
		William J. Dunaway
		Chief Financial Officer

5866



	Level 3 Financial Assets For the Three and Nine Months Ended June 30, 2018
(in millions)	Balances at beginning of period		Realized gains (losses) during period		Unrealized gains (losses) during period			Purchases/issuances		Settlements		Transfers in or (out) of Level 3		Balances at end of period
Assets:
Common and preferred stock, ADRs, and GDRs	$	0.1	$	—	$	(0.1	)	$	—	$	—	$	—	$	—
	$	0.1	$	—	$	(0.1	)	$	—	$	—	$	—	$	—