| June 30, 2021 | |||||||||||||||||
| Offsetting of collateralized transactions: | Gross Amounts Recognized | Amounts Offset in the Condensed Consolidated Balance Sheet | Net Amounts Presented in the Condensed Consolidated Balance Sheet | ||||||||||||||
| Securities purchased under agreements to resell | $ | 2,027.2 | $ | 0 | $ | 2,027.2 | |||||||||||
| Securities borrowed | $ | 1,697.3 | $ | — | $ | 1,697.3 | |||||||||||
| Securities sold under agreements to repurchase | $ | 3,627.6 | $ | 0 | $ | 3,627.6 | |||||||||||
| Securities loaned | $ | 1,700.3 | $ | — | $ | 1,700.3 | |||||||||||
| September 30, 2020 | |||||||||||||||||
| Offsetting of collateralized transactions: | Gross Amounts Recognized | Amounts Offset in the Condensed Consolidated Balance Sheet | Net Amounts Presented in the Condensed Consolidated Balance Sheet | ||||||||||||||
| Securities purchased under agreements to resell | $ | 1,696.2 | $ | 0 | $ | 1,696.2 | |||||||||||
| Securities borrowed | $ | 1,440.0 | $ | — | $ | 1,440.0 | |||||||||||
| Securities sold under agreements to repurchase | $ | 3,155.5 | $ | 0 | $ | 3,155.5 | |||||||||||
| Securities loaned | $ | 1,441.9 | $ | — | $ | 1,441.9 | |||||||||||
| June 30, 2022 | |||||||||||||||||
| Offsetting of collateralized transactions: | Gross Amounts Recognized | Amounts Offset in the Condensed Consolidated Balance Sheet | Net Amounts Presented in the Condensed Consolidated Balance Sheet | ||||||||||||||
| Securities purchased under agreements to resell | $ | 4,510.2 | $ | (2,794.0) | $ | 1,716.2 | |||||||||||
| Securities borrowed | $ | 1,108.7 | $ | — | $ | 1,108.7 | |||||||||||
| Securities sold under agreements to repurchase | $ | 5,601.7 | $ | (2,794.0) | $ | 2,807.7 | |||||||||||
| Securities loaned | $ | 1,095.5 | $ | — | $ | 1,095.5 | |||||||||||
| September 30, 2021 | |||||||||||||||||
| Offsetting of collateralized transactions: | Gross Amounts Recognized | Amounts Offset in the Condensed Consolidated Balance Sheet | Net Amounts Presented in the Condensed Consolidated Balance Sheet | ||||||||||||||
| Securities purchased under agreements to resell | $ | 2,239.9 | $ | — | $ | 2,239.9 | |||||||||||
| Securities borrowed | $ | 2,163.1 | $ | — | $ | 2,163.1 | |||||||||||
| Securities sold under agreements to repurchase | $ | 4,340.9 | $ | — | $ | 4,340.9 | |||||||||||
| Securities loaned | $ | 2,153.6 | $ | — | $ | 2,153.6 | |||||||||||
Note 11 – Commitments and Contingencies
Contingencies
On May 2, 2022, the Bankruptcy court approved a settlement agreement entered into by the Company’s subsidiary, StoneX Commodity Solutions LLC, certain banks, farmer groups and other parties to provide for the distribution of bankruptcy proceeds and assets. On May 27, 2022, StoneX Commodity Solutions LLC received $30.4 million from the final disposition of the proceeds of grain. The amount received through the bankruptcy proceedings was insufficient to cover the asset value of the soybean bushels, and the Company continues to evaluate its insurance coverage under applicable policies in-force, to cover the shortfall, and discussions with the Company’s insurance carriers are ongoing. As of June 30, 2022, receivables from clients, net, in the condensed consolidated balance sheet includes $1.2 million, net of an allowance of $3.0 million, relating to the shortfall in the proceeds the Company received in connection with the Bankruptcy court approved settlement agreement. There can be no
23
assurance as to the Company’s ability to recover any amounts, relating to the shortfall in proceeds received, through insurance coverage.
In November 16, 2018, balances in approximately 300 client accounts of the FCM division of the Company’s wholly owned subsidiary, StoneX 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 StoneX 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 providing services only to “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 clientclients’ accounts, while StoneX Financial Inc. acted solely as the clearing firm in its role as the FCM.
StoneX Financial Inc.’s client agreements hold account holders liable for all losses in their accounts and obligate the account holders to reimburse StoneX Financial Inc. for any account deficits in their accounts. As of June 30, 2021,2022, the aggregate receivable from these client accounts, net of collections and other allowable deductions (the “Net Client Accounts Receivable”), was $28.9$27.4 million, with no individual account receivable exceeding $1.4 million. StoneX Financial Inc. continues to pursue collectionAs of these receivables and intends both to enforce and to defend its rights aggressively, and to claim interest and costs of collection where applicable.
Additionally, StoneX 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 intendshas, and will continue to, defend them vigorously. The ultimate outcome of these arbitrations cannot presently be determined; however, the Company believes the likelihood of a material adverse outcome is remote.
During July 2022, the Company prevailed in an arbitration proceeding involving accountholders that were clients of OptionSellers. The arbitration panel denied the claims against the Company for trading losses incurred by those accountholders and also ordered those accountholders to pay their outstanding deficit balances to the Company. This arbitration victory followed a similar outcome in a separate arbitration decision issued in January 2022, in which the arbitration panel also denied the claims against the Company for trading losses incurred by the shareholders and ordered the accountholders to pay their outstanding deficits to the Company. During the three months ended June 30, 2022, the Company also entered into settlements with certain other accountholders whereby certain of these accountholders agreed to pay their outstanding deficit balances (none of which settlements involved the Company making any payments in respect of trading losses). There can be no assurance as to the outcome of future arbitrations or the Company’s ability to collect on successful court-awarded client receivables.
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. The Company does not currently believe that any potential losses related to this matter would materially and adversely 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 relevant policy’s limits.
As of June 30, 20212022 and September 30, 2020,2021, 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.
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
24
and limitations. As of June 30, 2021,2022, the Company had $1.2$1.3 million accrued for self-insured medical and dental claims included in Accounts payable and other accrued liabilities in the Condensed Consolidated Balance Sheet.
Note 12 – 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 income includes net actuarial losses from defined benefit pension plans, and foreign currency translation adjustments.adjustments, and cash flow hedge gains or losses. See notes 1 and 4 for additional information on cash flow hedges.
The following table summarizes the changes in accumulated other comprehensive loss, net for the nine months ended June 30, 2021.2022.
| (in millions) | Foreign Currency Translation Adjustment | Pension Benefits Adjustment | Accumulated Other Comprehensive Loss, net | |||||||||||||||||||||||
| Balances as of September 30, 2020 | $ | (36.0) | $ | (4.1) | $ | (40.1) | ||||||||||||||||||||
| Other comprehensive income | 16.3 | 0 | 16.3 | |||||||||||||||||||||||
| Balances as of June 30, 2021 | $ | (19.7) | $ | (4.1) | $ | (23.8) | ||||||||||||||||||||
| (in millions) | Foreign Currency Translation Adjustment | Pension Benefits Adjustment | Cash Flow Hedge | Accumulated Other Comprehensive Loss, net | ||||||||||||||||||||||||||||
| Balances as of September 30, 2021 | $ | (22.7) | $ | (2.4) | $ | — | $ | (25.1) | ||||||||||||||||||||||||
| Other comprehensive income/(loss), net of tax | (5.5) | — | (25.0) | (30.5) | ||||||||||||||||||||||||||||
| Balances as of June 30, 2022 | $ | (28.2) | $ | (2.4) | $ | (25.0) | $ | (55.6) | ||||||||||||||||||||||||
Note 13 – Revenue from Contracts with Clients
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 in accordance with FASB ASC 606, Revenues from Contracts with Customers (Topic 606). 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 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.
Topic 606 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%4.5% and 1.4%6.0% of the Company’s total revenues for the three months ended June 30, 2022 and 2021, respectively, and 2020, respectively. The Company’s revenues from contracts with clients subject to Topic 606 represent approximately 1.4%5.5% and 0.9%4.7% of the Company’s total revenues for the nine months ended June 30, 20212022 and 2020, respectively.
25
The following table represents a disaggregation of the Company’s total revenues separated between revenues from contracts with clients and other sources of revenue for the periods indicated.
| Three Months Ended June 30, | Nine Months Ended June 30, | ||||||||||||||||||||||
| (in millions) | 2022 | 2021 | 2022 | 2021 | |||||||||||||||||||
| Revenues from contracts with clients: | |||||||||||||||||||||||
| Commission and clearing fees: | |||||||||||||||||||||||
| Sales-based: | |||||||||||||||||||||||
| Exchange-traded futures and options | $ | 53.1 | $ | 51.8 | $ | 155.4 | $ | 147.5 | |||||||||||||||
| OTC derivative brokerage | 4.0 | 3.8 | 13.3 | 12.2 | |||||||||||||||||||
| Equities and fixed income | 15.4 | 13.2 | 47.1 | 47.0 | |||||||||||||||||||
| Mutual funds | 1.0 | 1.4 | 3.4 | 4.1 | |||||||||||||||||||
| Insurance and annuity products | 2.2 | 2.2 | 7.4 | 6.8 | |||||||||||||||||||
| Other | 0.6 | 0.9 | 2.3 | 1.2 | |||||||||||||||||||
| Total sales-based commission | 76.3 | 73.3 | 228.9 | 218.8 | |||||||||||||||||||
| Trailing: | |||||||||||||||||||||||
| Mutual funds | 3.4 | 3.7 | 10.9 | 10.6 | |||||||||||||||||||
| Insurance and annuity products | 3.9 | 4.4 | 12.5 | 12.5 | |||||||||||||||||||
| Total trailing commission | 7.3 | 8.1 | 23.4 | 23.1 | |||||||||||||||||||
| Clearing fees | 38.8 | 37.4 | 115.8 | 115.3 | |||||||||||||||||||
| Trade conversion fees | 3.0 | 3.2 | 9.0 | 8.9 | |||||||||||||||||||
| Other | 1.5 | 2.0 | 4.5 | 7.1 | |||||||||||||||||||
| Total commission and clearing fees | 126.9 | 124.0 | 381.6 | 373.2 | |||||||||||||||||||
| Consulting, management, and account fees: | |||||||||||||||||||||||
| Underwriting fees | 0.1 | 0.2 | 0.4 | 0.6 | |||||||||||||||||||
| Asset management fees | 11.5 | 9.8 | 33.5 | 27.8 | |||||||||||||||||||
| Advisory and consulting fees | 8.2 | 6.3 | 23.2 | 18.9 | |||||||||||||||||||
| Sweep program fees | 2.5 | 0.6 | 3.5 | 2.2 | |||||||||||||||||||
| Client account fees | 3.8 | 3.6 | 11.8 | 11.5 | |||||||||||||||||||
| Other | 1.6 | 1.8 | 4.8 | 6.4 | |||||||||||||||||||
| Total consulting, management, and account fees | 27.7 | 22.3 | 77.2 | 67.4 | |||||||||||||||||||
| Sales of physical commodities: | |||||||||||||||||||||||
| Precious metals sales | 696.0 | 470.0 | 2,283.3 | 994.3 | |||||||||||||||||||
| Total revenues from contracts with clients | $ | 850.6 | $ | 616.3 | $ | 2,742.1 | $ | 1,434.9 | |||||||||||||||
| Method of revenue recognition: | |||||||||||||||||||||||
| Point-in-time | $ | 821.1 | $ | 591.5 | $ | 2,658.5 | $ | 1,362.9 | |||||||||||||||
| Time elapsed | 29.5 | 24.8 | 83.6 | 72.0 | |||||||||||||||||||
| Total revenues from contracts with clients | 850.6 | 616.3 | 2,742.1 | 1,434.9 | |||||||||||||||||||
| Other sources of revenues | |||||||||||||||||||||||
| Physical precious metals trading | 16,808.1 | 8,817.1 | 43,334.7 | 26,997.4 | |||||||||||||||||||
| Physical agricultural and energy product trading | 926.9 | 498.8 | 2,596.1 | 1,482.0 | |||||||||||||||||||
| Principal gains, net | 295.2 | 232.1 | 869.8 | 700.7 | |||||||||||||||||||
| Interest income | 50.1 | 27.8 | 112.3 | 72.4 | |||||||||||||||||||
| Total revenues | $ | 18,930.9 | $ | 10,192.1 | $ | 49,655.0 | $ | 30,687.4 | |||||||||||||||
| Total revenues by primary geographic region: | |||||||||||||||||||||||
| United States | $ | 1,278.3 | $ | 808.2 | $ | 3,607.6 | $ | 2,420.7 | |||||||||||||||
| Europe | 813.1 | 542.7 | 2,631.3 | 1,205.2 | |||||||||||||||||||
| South America | 21.7 | 20.2 | 63.0 | 49.3 | |||||||||||||||||||
| Middle East and Asia | 16,814.7 | 8,818.7 | 43,345.4 | 27,005.8 | |||||||||||||||||||
| Other | 3.1 | 2.3 | 7.7 | 6.4 | |||||||||||||||||||
| Total revenues | $ | 18,930.9 | $ | 10,192.1 | $ | 49,655.0 | $ | 30,687.4 | |||||||||||||||
| Operating revenues by primary geographic region: | |||||||||||||||||||||||
| United States | $ | 354.7 | $ | 310.3 | $ | 1,023.3 | $ | 946.2 | |||||||||||||||
| Europe | 125.8 | 77.2 | 364.8 | 224.8 | |||||||||||||||||||
| South America | 21.7 | 19.9 | 63.0 | 49.0 | |||||||||||||||||||
| Middle East and Asia | 23.5 | 21.6 | 65.3 | 56.4 | |||||||||||||||||||
| Other | 3.1 | 2.5 | 7.6 | 6.6 | |||||||||||||||||||
| Total operating revenues | $ | 528.8 | $ | 431.5 | $ | 1,524.0 | $ | 1,283.0 | |||||||||||||||
| Three Months Ended June 30, | Nine Months Ended June 30, | ||||||||||||||||||||||
| (in millions) | 2021 | 2020 | 2021 | 2020 | |||||||||||||||||||
| Revenues from contracts with clients: | |||||||||||||||||||||||
| Commission and clearing fees: | |||||||||||||||||||||||
| Sales-based: | |||||||||||||||||||||||
| Exchange-traded futures and options | $ | 51.8 | $ | 36.4 | $ | 147.5 | $ | 108.9 | |||||||||||||||
| OTC derivative brokerage | 3.8 | 4.0 | 12.2 | 16.2 | |||||||||||||||||||
| Equities and fixed income | 13.2 | 5.2 | 47.0 | 16.6 | |||||||||||||||||||
| Mutual funds | 1.4 | 1.1 | 4.1 | 4.0 | |||||||||||||||||||
| Insurance and annuity products | 2.2 | 1.7 | 6.8 | 6.2 | |||||||||||||||||||
| Other | 0.9 | 0.3 | 1.2 | 1.1 | |||||||||||||||||||
| Total sales-based commission | 73.3 | 48.7 | 218.8 | 153.0 | |||||||||||||||||||
| Trailing: | |||||||||||||||||||||||
| Mutual funds | 3.7 | 3.1 | 10.6 | 9.7 | |||||||||||||||||||
| Insurance and annuity products | 4.4 | 3.6 | 12.5 | 11.3 | |||||||||||||||||||
| Total trailing commission | 8.1 | 6.7 | 23.1 | 21.0 | |||||||||||||||||||
| Clearing fees | 37.4 | 33.3 | 115.3 | 104.4 | |||||||||||||||||||
| Trade conversion fees | 3.2 | 1.8 | 8.9 | 7.5 | |||||||||||||||||||
| Other | 2.0 | 5.6 | 7.1 | 14.0 | |||||||||||||||||||
| Total commission and clearing fees: | 124.0 | 96.1 | 373.2 | 299.9 | |||||||||||||||||||
| Consulting, management, and account fees: | |||||||||||||||||||||||
| Underwriting fees | 0.2 | 0 | 0.6 | 0.4 | |||||||||||||||||||
| Asset management fees | 9.8 | 7.0 | 27.8 | 23.2 | |||||||||||||||||||
| Advisory and consulting fees | 6.3 | 5.7 | 18.9 | 17.0 | |||||||||||||||||||
| Sweep program fees | 0.6 | 1.0 | 2.2 | 8.6 | |||||||||||||||||||
| Client account fees | 3.6 | 2.8 | 11.5 | 8.9 | |||||||||||||||||||
| Other | 1.8 | 2.9 | 6.4 | 5.2 | |||||||||||||||||||
| Total consulting, management, and account fees | 22.3 | 19.4 | 67.4 | 63.3 | |||||||||||||||||||
| Total revenues from contracts with clients | $ | 146.3 | $ | 115.5 | $ | 440.6 | $ | 363.2 | |||||||||||||||
| Method of revenue recognition: | |||||||||||||||||||||||
| Point-in-time | $ | 121.5 | $ | 95.1 | $ | 368.6 | $ | 293.4 | |||||||||||||||
| Time elapsed | 24.8 | 20.4 | 72.0 | 69.8 | |||||||||||||||||||
| Total revenues from contracts with clients | 146.3 | 115.5 | 440.6 | 363.2 | |||||||||||||||||||
| Other sources of revenues | |||||||||||||||||||||||
| Physical precious metals trading | 9,287.1 | 7,621.2 | 27,991.7 | 37,973.9 | |||||||||||||||||||
| Physical agricultural and energy product trading | 498.8 | 323.3 | 1,482.0 | 965.5 | |||||||||||||||||||
| Principal gains, net | 232.1 | 161.0 | 700.7 | 442.0 | |||||||||||||||||||
| Interest income | 27.8 | 22.4 | 72.4 | 110.1 | |||||||||||||||||||
| Total revenues | $ | 10,192.1 | $ | 8,243.4 | $ | 30,687.4 | $ | 39,854.7 | |||||||||||||||
| Primary geographic region: | |||||||||||||||||||||||
| United States | $ | 808.2 | $ | 554.2 | $ | 2,420.7 | $ | 1,652.1 | |||||||||||||||
| Europe | 542.7 | 114.1 | 1,205.2 | 375.7 | |||||||||||||||||||
| South America | 20.2 | 14.6 | 49.3 | 46.1 | |||||||||||||||||||
| Middle East and Asia | 8,818.7 | 7,558.5 | 27,005.8 | 37,777.3 | |||||||||||||||||||
| Other | 2.3 | 2.0 | 6.4 | 3.5 | |||||||||||||||||||
| Total revenues | $ | 10,192.1 | $ | 8,243.4 | $ | 30,687.4 | $ | 39,854.7 | |||||||||||||||
26
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 feesfee revenue and consulting, management, and account fees revenuesrevenue are primarily related to the Commercial, Institutional and InstitutionalRetail reportable segments. Principal gains, net are contributed by all of the Company’s reportable segments. Interest income is primarily related to the Commercial and Institutional reportable segments. Physical precious
Precious metals trading and physical agricultural and energy product trading revenues are primarily related to the Commercial reportable segment. Precious metals sales that are recognized on a point-in-time basis are included in the Retail and the Commercial reportable segments
Remaining Performance Obligations
Remaining performance obligations are services that the Company has committed to perform in the 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 fair value of eligible assets in client’s accounts, future revenue associated with remaining performance obligations cannot be determined as such fees are subject to fluctuations in the fair value of eligible assets in clients’ accounts.
Note 14 – Other Expenses
Other expenses consisted of the following, for the periods indicated.
| Three Months Ended June 30, | Nine Months Ended June 30, | ||||||||||||||||||||||
| (in millions) | 2021 | 2020 | 2021 | 2020 | |||||||||||||||||||
| Insurance | $ | 1.6 | $ | 1.1 | $ | 5.3 | $ | 3.1 | |||||||||||||||
| Office supplies and printing | 0.2 | 0.6 | 0.9 | 1.5 | |||||||||||||||||||
| Other clearing related expenses | 0.9 | 0.8 | 2.9 | 2.2 | |||||||||||||||||||
| Other non-income taxes | 4.1 | 1.2 | 11.4 | 3.8 | |||||||||||||||||||
| Contingent consideration, net | 0 | 0.2 | 0.9 | 0.3 | |||||||||||||||||||
| Other | 3.9 | 3.2 | 12.5 | 8.7 | |||||||||||||||||||
| Total other expenses | $ | 10.7 | $ | 7.1 | $ | 33.9 | $ | 19.6 | |||||||||||||||
| Three Months Ended June 30, | Nine Months Ended June 30, | ||||||||||||||||||||||
| (in millions) | 2022 | 2021 | 2022 | 2021 | |||||||||||||||||||
| Non-income taxes | $ | 4.6 | $ | 4.1 | $ | 13.7 | $ | 11.4 | |||||||||||||||
| Insurance | 2.8 | 1.6 | 8.2 | 5.3 | |||||||||||||||||||
| Employee related expenses | 2.9 | 1.8 | 6.9 | 5.1 | |||||||||||||||||||
| Other direct business expenses | 2.5 | 1.3 | 6.9 | 4.6 | |||||||||||||||||||
| Membership fees | 0.6 | 0.8 | 2.4 | 2.0 | |||||||||||||||||||
| Director and public company expenses | 0.3 | 0.3 | 1.3 | 1.1 | |||||||||||||||||||
| Office expenses | 0.4 | 0.2 | 1.2 | 0.9 | |||||||||||||||||||
| Other expenses | 1.7 | 0.6 | 4.0 | 3.5 | |||||||||||||||||||
| Total other expenses | $ | 15.8 | $ | 10.7 | $ | 44.6 | $ | 33.9 | |||||||||||||||
During the quarter ended December 31, 2021, the Company modified its Other expenses presentation to better explain its current entities and businesses. Prior year values have been adjusted to reflect this format, but total Other expenses has not changed within this footnote or the condensed consolidated income statements.
Note 15 – Income Taxes
The income tax provision for interim periods comprises income tax on ordinary income income/(loss) figures provided at the most recent estimated annual effective income tax rate, adjusted for the income tax effect of discrete items. Management uses an estimated annual effective income tax rate based on the forecasted pretax income income/(loss) and statutory tax rates in the various jurisdictions in which it operates. The Company’s effective income tax rate differs from the U.S. statutory income tax rate primarily due to state and local taxes, global intangible low taxed income (“GILTI”), 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 income tax benefit can be recognized are excluded from the estimated annual effective income tax rate.
Deferred income tax balances reflect the 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. 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.
27
Current and Prior Period Tax Expense
Income tax expense of $11.8$21.8 million and $12.4$11.8 million for the three months ended June 30, 20212022 and 2020,2021, respectively, and income tax expense of $40.2$56.0 million and $34.6$40.2 million for the nine months ended June 30, 20212022 and 2020,2021, respectively, reflects estimated federal, foreign, state and local income taxes.
For the three months ended June 30, 20212022 and 2020,2021, the Company’s effective tax rate was 26%31% and 25%26%, respectively. The effective tax rate was higher than the U.S. federal statutory rate of 21% due to U.S. state and local taxes, GILTI, U.S. and foreign permanent differences, and the amount of foreign earnings taxed at higher tax rates. The effective tax rate was higher in the three months ended June 30, 2022 compared to June 30, 2021 as a result of the mix in the amount of foreign earnings taxed a higher tax rates, as well as the three months ended June 30, 2021 including a non-taxable gain on acquisition of $3.3 million.
Note 16 – Regulatory Capital and Other Regulatory Requirements
The Company’s activities are subject to significant governmental regulation, both in the U.S. and in the international jurisdictions in which it operates. Subsidiaries of the Company were in compliance with all of their regulatory requirements as of June 30, 2021.2022. The following table details those subsidiaries with minimum regulatory requirements in excess of $5$10.0 million along with the actual balance maintained as of that date.
| (in millions) | (in millions) | As of June 30, 2021 | (in millions) | As of June 30, 2022 | ||||||||||||||||||||||||||||||
| Subsidiary | Subsidiary | Regulatory Authority | Actual | Minimum Requirement | Subsidiary | Regulatory Authority | Actual | Minimum Requirement | ||||||||||||||||||||||||||
| StoneX Financial Inc. | StoneX Financial Inc. | SEC and CFTC | $ | 307.0 | $ | 197.9 | StoneX Financial Inc. | SEC and CFTC | $ | 352.7 | $ | 233.8 | ||||||||||||||||||||||
| StoneX Financial Ltd. | StoneX Financial Ltd. | Financial Conduct Authority ("FCA") | $ | 370.1 | $ | 229.8 | StoneX Financial Ltd. | Financial Conduct Authority (“FCA”) | $ | 403.0 | $ | 358.0 | ||||||||||||||||||||||
| Gain Capital Group, LLC | Gain Capital Group, LLC | CFTC and NFA | $ | 49.3 | $ | 29.9 | Gain Capital Group, LLC | CFTC and NFA | $ | 55.8 | $ | 29.1 | ||||||||||||||||||||||
| StoneX Markets LLC | StoneX Markets LLC | CFTC and NFA | $ | 182.7 | $ | 127.9 | ||||||||||||||||||||||||||||
Certain other subsidiaries of the Company, typically with a minimum requirement less than $5.0$10.0 million, are also subject to net capital requirements promulgated by authorities in the countries in which they operate. As of June 30, 2021,2022, all of the Company’s subsidiaries were in compliance with their local regulatory requirements.
Note 17 – Segment Analysis
•Commercial
•Institutional
•Retail
•Global Payments
Commercial
The Company offers commercial clients a comprehensive array of products and services, including risk management and hedging services, execution and clearing of exchange-traded and OTC products, voice brokerage, market intelligence and physical trading, as well as commodity financing and logistics services. The ability to provide these high-value-added products and services differentiates the Company from its competitors and maximizes the opportunity to retain clients.
Institutional
The Company provides institutional clients with a complete suite of equity trading services to help them find liquidity with best execution, consistent liquidity across a robust array of fixed income products, competitive and efficient clearing and execution in all major futures and securities exchanges globally, as well as prime brokerage in equities and major foreign currency pairs and swap transactions. In addition, the Company originates, structures and places debt instruments in the international and domestic capital markets. These instruments include asset-backed securities (primarily in Argentina) and domestic municipal securities.
Retail
The Company provides retail clients around the world access to over 15,00018,000 global financial markets, including spot foreign exchange ("forex"), both financial trading and physical investment in precious metals, as well as contracts for difference (“CFDs”), which are investment products with returns linked to the performance of underlying assets. In addition, its independent wealth management business offers a comprehensive product suite to retail investors in the U.S.
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Global Payments
The Company provides customized foreign exchange and treasury services to banks and commercial businesses, as well as charities and non-governmental organizations and government organizations. The Company provides transparent pricing and
offers payments services in more than 170185 countries and 140 currencies, which it believes is more than any other payments solution provider.
********
The total revenues reported combine gross revenues from physical contracts 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 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 expenses, 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, expenses, receivables and payables are eliminated upon consolidation, except revenues and expenses 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 participants.consolidation.
Total revenues, operating revenues and net operating revenues shown as “Corporate Unallocated” primarily consist of interest income from its centralized corporate treasury function. In the normal course of operations, the Company operates a centralized corporate treasury function in which it may sweep excess cash from certain subsidiaries, where permitted within regulatory limitations, in exchange for a short-term interest bearing intercompany payable, or provide excess cash to subsidiaries in exchange for a short-term interest bearing intercompany receivable in lieu of the subsidiary borrowing on external credit facilities. The intercompany receivables and payables are eliminated during consolidation; however, this practice may impact reported total assets between segments.
Net costs not allocated to operating segments include costs and expenses of certain shared services such as information technology, accounting and treasury, credit and risk, legal and compliance, and human resources and other activities.
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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 June 30, | Nine Months Ended June 30, | |||||||||||||||||||||||||||||||||||||||||||
| (in millions) | (in millions) | 2021 | 2020 | 2021 | 2020 | (in millions) | 2022 | 2021 | 2022 | 2021 | ||||||||||||||||||||||||||||||||||||
| Total revenues: | Total revenues: | Total revenues: | ||||||||||||||||||||||||||||||||||||||||||||
| Commercial | Commercial | $ | 9,449.3 | $ | 7,968.1 | $ | 28,831.2 | $ | 39,011.8 | Commercial | $ | 18,368.7 | $ | 9,449.3 | $ | 47,984.8 | $ | 28,831.2 | ||||||||||||||||||||||||||||
| Institutional | Institutional | 173.0 | 169.8 | 530.1 | 487.9 | Institutional | 209.1 | 173.0 | 573.2 | 530.1 | ||||||||||||||||||||||||||||||||||||
| Retail | Retail | 541.2 | 79.1 | 1,236.9 | 271.9 | Retail | 312.1 | 541.2 | 978.0 | 1,236.9 | ||||||||||||||||||||||||||||||||||||
| Global Payments | Global Payments | 35.0 | 27.4 | 102.9 | 88.2 | Global Payments | 44.3 | 35.0 | 127.7 | 102.9 | ||||||||||||||||||||||||||||||||||||
| Corporate Unallocated | Corporate Unallocated | (2.0) | 2.3 | (1.3) | 11.5 | Corporate Unallocated | 2.9 | (2.0) | 6.9 | (1.3) | ||||||||||||||||||||||||||||||||||||
| Eliminations | Eliminations | (4.4) | (3.3) | (12.4) | (16.6) | Eliminations | (6.2) | (4.4) | (15.6) | (12.4) | ||||||||||||||||||||||||||||||||||||
| Total | Total | $ | 10,192.1 | $ | 8,243.4 | $ | 30,687.4 | $ | 39,854.7 | Total | $ | 18,930.9 | $ | 10,192.1 | $ | 49,655.0 | $ | 30,687.4 | ||||||||||||||||||||||||||||
| Operating revenues: | Operating revenues: | Operating revenues: | ||||||||||||||||||||||||||||||||||||||||||||
| Commercial | Commercial | $ | 152.2 | $ | 104.3 | $ | 402.1 | $ | 323.7 | Commercial | $ | 170.2 | $ | 152.2 | $ | 506.9 | $ | 402.1 | ||||||||||||||||||||||||||||
| Institutional | Institutional | 173.0 | 169.8 | 530.1 | 487.9 | Institutional | 209.1 | 173.0 | 573.2 | 530.1 | ||||||||||||||||||||||||||||||||||||
| Retail | Retail | 77.7 | 22.1 | 261.6 | 71.5 | Retail | 108.5 | 77.7 | 324.9 | 261.6 | ||||||||||||||||||||||||||||||||||||
| Global Payments | Global Payments | 35.0 | 27.4 | 102.9 | 88.2 | Global Payments | 44.3 | 35.0 | 127.7 | 102.9 | ||||||||||||||||||||||||||||||||||||
| Corporate Unallocated | Corporate Unallocated | (2.0) | 2.3 | (1.3) | 11.5 | Corporate Unallocated | 2.9 | (2.0) | 6.9 | (1.3) | ||||||||||||||||||||||||||||||||||||
| Eliminations | Eliminations | (4.4) | (3.3) | (12.4) | (16.6) | Eliminations | (6.2) | (4.4) | (15.6) | (12.4) | ||||||||||||||||||||||||||||||||||||
| Total | Total | $ | 431.5 | $ | 322.6 | $ | 1,283.0 | $ | 966.2 | Total | $ | 528.8 | $ | 431.5 | $ | 1,524.0 | $ | 1,283.0 | ||||||||||||||||||||||||||||
| Net operating revenues (loss): | Net operating revenues (loss): | Net operating revenues (loss): | ||||||||||||||||||||||||||||||||||||||||||||
| Commercial | Commercial | $ | 125.0 | $ | 86.6 | $ | 325.8 | $ | 264.6 | Commercial | $ | 141.9 | $ | 125.0 | $ | 427.4 | $ | 325.8 | ||||||||||||||||||||||||||||
| Institutional | Institutional | 111.1 | 113.1 | 340.2 | 282.8 | Institutional | 126.4 | 111.1 | 352.1 | 340.2 | ||||||||||||||||||||||||||||||||||||
| Retail | Retail | 45.9 | 6.7 | 168.7 | 21.3 | Retail | 77.9 | 45.9 | 229.5 | 168.7 | ||||||||||||||||||||||||||||||||||||
| Global Payments | Global Payments | 33.1 | 26.0 | 97.5 | 83.8 | Global Payments | 41.4 | 33.1 | 120.6 | 97.5 | ||||||||||||||||||||||||||||||||||||
| Corporate Unallocated | Corporate Unallocated | (17.1) | (4.5) | (43.9) | (10.7) | Corporate Unallocated | (13.5) | (17.1) | (41.4) | (43.9) | ||||||||||||||||||||||||||||||||||||
| Total | Total | $ | 298.0 | $ | 227.9 | $ | 888.3 | $ | 641.8 | Total | $ | 374.1 | $ | 298.0 | $ | 1,088.2 | $ | 888.3 | ||||||||||||||||||||||||||||
| Net contribution: | Net contribution: | 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 | Commercial | $ | 86.9 | $ | 59.2 | $ | 225.5 | $ | 181.1 | Commercial | $ | 101.9 | $ | 86.9 | $ | 302.2 | $ | 225.5 | ||||||||||||||||||||||||||||
| Institutional | Institutional | 69.9 | 77.3 | 212.3 | 195.8 | Institutional | 74.7 | 69.9 | 214.4 | 212.3 | ||||||||||||||||||||||||||||||||||||
| Retail | Retail | 41.9 | 6.2 | 156.0 | 20.1 | Retail | 71.7 | 41.9 | 212.4 | 156.0 | ||||||||||||||||||||||||||||||||||||
| Global Payments | Global Payments | 26.5 | 20.9 | 78.3 | 67.3 | Global Payments | 33.6 | 26.5 | 97.6 | 78.3 | ||||||||||||||||||||||||||||||||||||
| Total | Total | $ | 225.2 | $ | 163.6 | $ | 672.1 | $ | 464.3 | Total | $ | 281.9 | $ | 225.2 | $ | 826.6 | $ | 672.1 | ||||||||||||||||||||||||||||
| Segment income: | Segment income: | Segment income: | ||||||||||||||||||||||||||||||||||||||||||||
| (Net contribution less non-variable direct segment costs) | (Net contribution less non-variable direct segment costs) | (Net contribution less non-variable direct segment costs) | ||||||||||||||||||||||||||||||||||||||||||||
| Commercial | Commercial | $ | 60.4 | $ | 37.2 | $ | 148.1 | $ | 107.6 | Commercial | $ | 72.5 | $ | 60.4 | $ | 208.1 | $ | 148.1 | ||||||||||||||||||||||||||||
| Institutional | Institutional | 46.5 | 53.8 | 143.3 | 130.5 | Institutional | 47.7 | 46.5 | 129.6 | 143.3 | ||||||||||||||||||||||||||||||||||||
| Retail | Retail | 6.0 | 3.8 | 55.9 | 13.7 | Retail | 26.3 | 6.0 | 95.2 | 55.9 | ||||||||||||||||||||||||||||||||||||
| Global Payments | Global Payments | 20.3 | 15.9 | 60.1 | 52.0 | Global Payments | 24.6 | 20.3 | 73.0 | 60.1 | ||||||||||||||||||||||||||||||||||||
| Total | Total | $ | 133.2 | $ | 110.7 | $ | 407.4 | $ | 303.8 | Total | $ | 171.1 | $ | 133.2 | $ | 505.9 | $ | 407.4 | ||||||||||||||||||||||||||||
| 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 | Segment income | $ | 133.2 | $ | 110.7 | $ | 407.4 | $ | 303.8 | Segment income | $ | 171.1 | $ | 133.2 | $ | 505.9 | $ | 407.4 | ||||||||||||||||||||||||||||
| Net costs not allocated to operating segments | Net costs not allocated to operating segments | (90.8) | (61.7) | (261.8) | (177.1) | Net costs not allocated to operating segments | (100.2) | (90.8) | (295.1) | (261.8) | ||||||||||||||||||||||||||||||||||||
| Gain on acquisitions and other gains | 3.6 | 0 | 3.6 | 0.1 | ||||||||||||||||||||||||||||||||||||||||||
| Other gain | Other gain | — | 3.6 | — | 3.6 | |||||||||||||||||||||||||||||||||||||||||
| Income before tax | Income before tax | $ | 46.0 | $ | 49.0 | $ | 149.2 | $ | 126.8 | Income before tax | $ | 70.9 | $ | 46.0 | $ | 210.8 | $ | 149.2 | ||||||||||||||||||||||||||||
| (in millions) | (in millions) | As of June 30, 2021 | As of September 30, 2020 | (in millions) | As of June 30, 2022 | As of September 30, 2021 | ||||||||||||||||||||||||||||||||||||||||
| Total assets: | Total assets: | Total assets: | ||||||||||||||||||||||||||||||||||||||||||||
| Commercial | Commercial | $ | 3,357.8 | $ | 2,753.6 | Commercial | $ | 4,883.5 | $ | 3,969.9 | ||||||||||||||||||||||||||||||||||||
| Institutional | Institutional | 10,669.6 | 8,740.8 | Institutional | 11,867.3 | 12,403.3 | ||||||||||||||||||||||||||||||||||||||||
| Retail | Retail | 1,403.2 | 1,245.9 | Retail | 1,558.6 | 1,380.9 | ||||||||||||||||||||||||||||||||||||||||
| Global Payments | Global Payments | 440.4 | 315.9 | Global Payments | 543.0 | 243.8 | ||||||||||||||||||||||||||||||||||||||||
| Corporate Unallocated | Corporate Unallocated | 928.8 | 418.7 | Corporate Unallocated | 556.4 | 841.7 | ||||||||||||||||||||||||||||||||||||||||
| Total | Total | $ | 16,799.8 | $ | 13,474.9 | Total | $ | 19,408.8 | $ | 18,839.6 | ||||||||||||||||||||||||||||||||||||
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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 StoneX Group Inc. and its consolidated subsidiaries. StoneX Group Inc. was formerly INTL FCStone Inc.
The following discussion and analysis should be read in conjunction with the condensed consolidated 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 the Company, including adverse changes in economic, political and market conditions, losses from our market-making and trading activities arising from counterparty 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, United States (“U.S.”) federal and U.S. state securities laws, the impact of changes in technology in the securities and commodities trading industries and the potential impact of the coronavirus (“COVID-19”) pandemic on our business, operations, results of operations, financial condition, workforce or the operations or decisions of our customers, suppliers or business customers. 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, except as required by law. We caution readers that any forward-looking statements are not guarantees of future performance.
Overview
We operate a global financial services network that connects companies, organizations, traders and investors to the global market ecosystem through a unique blend of digital platforms, end-to-end clearing and execution services, high touch service and deep expertise. We strive to be the one trusted partner to our clients, providing our network, product and services to allow them to pursue trading opportunities, manage their market risks, make investments and improve their business performance. Our businesses are supported by our global infrastructure of regulated operating subsidiaries, our advanced technology platform and our team of more than 3,000approximately 3,500 employees as of June 30, 2021.2022. We believe our 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. For additional information, see Overview of Business and Strategy within Item 1. Business section of our Annual Report on Form 10-K for the fiscal year ended September 30, 2020.2021.
We report our operating segments based primarily on the nature of the clientclients we serve (commercial, institutional, and retail), and a fourth operating segment, our global payments business. See Segment Information for a listing of business activities performed within our reportable segments.
The third quarter of fiscal 2021, worldwide social2022 was marked with the effects of widespread inflationary pressures on global markets, sharp increases in short term interest rates and economic activity has been severely impacted by the spreadcontinued volatility in both financial and threat of coronavirus COVID-19. In March 2020, COVID-19 was recognized as a global pandemic and spread to many regions of the world, including all countries in which we have operations.physical markets. The responses by governments and societies to the COVID-19 pandemic, which include temporary closures of businesses, social distancing, travel restrictions, “shelter in place” and other governmental regulations and various economic stimulus programs, have significantly impacted market volatility and general economic conditions. We have and continue to closely track the evolving impact of COVID-19 and are focused on helping our customers and employees through these difficult times.
Operating revenues increased $97.3 million, or 23%, to $528.8 million in securities products have declined versus the prior year,three months ended June 30, 2022 compared to $431.5 million in the three months ended June 30, 2021, led by our Institutional segment, which benefited from volatility relatedadded $36.1 million compared to the onset ofthree months ended June 30, 2021. In addition, our Retail and Commercial segments added $30.8 million and $18.0 million, respectively, compared to the COVID-19 pandemic, we experienced significant growth in securities volumes which led to modest growth in operating revenues in securities contracts. While we continue to face the headwind of historically low short-term interest rates, interestthree months ended June 30, 2021, while our Global Payments segment added $9.3 million.
Interest and fee income on client balances increased $2.4$14.5 million, or 52%207%, to $7.0$21.5 million in the three months ended June 30, 2022 compared to the three months ended June 30, 2021, principally driven by growth in our client balances, as the average client equity increased $0.9$2.2 billion, or 31%55%, to $4.0$6.1 billion and the average money-market/FDIC sweep balances increased $0.4$0.3 billion, or 28%16%, to $1.6$1.9 billion in the three months ended June 30, 20212022 compared to the three months ended June 30, 2020.2021.
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growth in retail segment operating revenues was partially offset by a $9.5 million increase in non-variable direct expenses compared to the three months ended June 30, 2021.
Segment income in our Commercial segment increased $12.1 million compared to the three months ended June 30, 2020,2021, principally as a result of strong growth in listed and OTC derivative operating resultsrevenues derived from physical contracts as a result of anheightened demand for precious metals in the three months ended June 30, 2022 compared to the three months ended June 30, 2021. This growth was partially offset by a $2.9 million increase in commodity volatilitynon-variable direct expenses compared to the three months ended June 30, 2021.
Segment income in Global Payments increased $4.3 million in the three months ended June 30, 2022 compared to the three months ended June 30, 2021, principally as a result of a 20% increase in average daily volume (“ADV”) and a 9% increase in rate per million (“RPM”) of global payments transacted.
Segment income in our Institutional segment increased $1.2 million in the three months ended June 30, 2022 compared to the three months ended June 30, 2021, as a 21% growth in operating revenues was principally offset by an $11.8 million increase in interest expense, a $10.5 million increase in variable compensation and a $3.6 million increase in non-variable direct expenses, compared to the three months ended June 30, 2020.
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 58%57% of total expenses in the current periodthree months ended June 30, 2022 compared to 61%58% in the prior year
Our net income decreased $2.4increased $14.9 million to $49.1 million in the three months ended June 30, 2022 compared to $34.2 million in the three months ended June 30, 20212021. Diluted earnings per share were $2.37 for the three months ended June 30, 2022 compared to $36.6 million$1.67 in the three months ended June 30, 2020. Diluted earnings per share were $1.67 for the three months ended June 30, 2021 compared to $1.87 in the three months ended June 30, 2020.2021.
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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 cost of sales of physical commodities from total revenues.
Set forth below is our discussion of the results of our operations, as viewed by management, for the periods indicated.
Financial Information (Unaudited)
| Three Months Ended June 30, | Nine Months Ended June 30, | Three Months Ended June 30, | Nine Months Ended June 30, | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| (in millions) | (in millions) | 2021 | 2020 | % Change | 2021 | 2020 | % Change | (in millions) | 2022 | 2021 | % Change | 2022 | 2021 | % Change | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Revenues: | Revenues: | Revenues: | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Sales of physical commodities | Sales of physical commodities | $ | 9,785.9 | $ | 7,944.5 | 23 | % | $ | 29,473.7 | $ | 38,939.4 | (24) | % | Sales of physical commodities | $ | 18,431.0 | $ | 9,785.9 | 88% | $ | 48,214.1 | $ | 29,473.7 | 64% | ||||||||||||||||||||||||||||||||||||||||||||||
| Principal gains, net | Principal gains, net | 232.1 | 161.0 | 44 | % | 700.7 | 442.0 | 59 | % | Principal gains, net | 295.2 | 232.1 | 27% | 869.8 | 700.7 | 24% | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Commission and clearing fees | Commission and clearing fees | 124.0 | 96.1 | 29 | % | 373.2 | 299.9 | 24 | % | Commission and clearing fees | 126.9 | 124.0 | 2% | 381.6 | 373.2 | 2% | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Consulting, management, and account fees | Consulting, management, and account fees | 22.3 | 19.4 | 15 | % | 67.4 | 63.3 | 6 | % | Consulting, management, and account fees | 27.7 | 22.3 | 24% | 77.2 | 67.4 | 15% | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Interest income | Interest income | 27.8 | 22.4 | 24 | % | 72.4 | 110.1 | (34) | % | Interest income | 50.1 | 27.8 | 80% | 112.3 | 72.4 | 55% | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total revenues | Total revenues | 10,192.1 | 8,243.4 | 24 | % | 30,687.4 | 39,854.7 | (23) | % | Total revenues | 18,930.9 | 10,192.1 | 86% | 49,655.0 | 30,687.4 | 62% | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Cost of sales of physical commodities | Cost of sales of physical commodities | 9,760.6 | 7,920.8 | 23 | % | 29,404.4 | 38,888.5 | (24) | % | Cost of sales of physical commodities | 18,402.1 | 9,760.6 | 89% | 48,131.0 | 29,404.4 | 64% | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Operating revenues | Operating revenues | 431.5 | 322.6 | 34 | % | 1,283.0 | 966.2 | 33 | % | Operating revenues | 528.8 | 431.5 | 23% | 1,524.0 | 1,283.0 | 19% | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Transaction-based clearing expenses | Transaction-based clearing expenses | 67.1 | 55.3 | 21 | % | 207.3 | 165.4 | 25 | % | Transaction-based clearing expenses | 74.7 | 67.1 | 11% | 222.1 | 207.3 | 7% | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Introducing broker commissions | Introducing broker commissions | 41.8 | 24.0 | 74 | % | 120.8 | 79.8 | 51 | % | Introducing broker commissions | 41.2 | 41.8 | (1)% | 122.7 | 120.8 | 2% | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Interest expense | Interest expense | 14.5 | 11.5 | 26 | % | 35.5 | 70.4 | (50) | % | Interest expense | 28.1 | 14.5 | 94% | 57.9 | 35.5 | 63% | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Interest expense on corporate funding | Interest expense on corporate funding | 10.1 | 3.9 | 159 | % | 31.1 | 8.8 | 253 | % | Interest expense on corporate funding | 10.7 | 10.1 | 6% | 33.1 | 31.1 | 6% | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net operating revenues | Net operating revenues | 298.0 | 227.9 | 31 | % | 888.3 | 641.8 | 38 | % | Net operating revenues | 374.1 | 298.0 | 26% | 1,088.2 | 888.3 | 23% | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Compensation and benefits | Compensation and benefits | 177.3 | 132.5 | 34 | % | 515.9 | 373.2 | 38 | % | Compensation and benefits | 202.2 | 177.3 | 14% | 584.3 | 515.9 | 13% | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Bad debts | 1.3 | 1.8 | (28) | % | 3.7 | 6.2 | (40) | % | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Bad debt (recovery) expense, net | Bad debt (recovery) expense, net | (0.7) | 1.3 | (154)% | 11.4 | 3.7 | 208% | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Other expenses | Other expenses | 77.0 | 44.6 | 73 | % | 223.1 | 135.7 | 64 | % | Other expenses | 101.7 | 77.0 | 32% | 288.1 | 223.1 | 29% | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total compensation and other expenses | Total compensation and other expenses | 255.6 | 178.9 | 43 | % | 742.7 | 515.1 | 44 | % | Total compensation and other expenses | 303.2 | 255.6 | 19% | 883.8 | 742.7 | 19% | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Gain on acquisitions and other gains | 3.6 | — | — | 3.6 | 0.1 | 3,500 | % | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Other gain | Other gain | — | 3.6 | (100)% | 6.4 | 3.6 | 78% | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Income before tax | Income before tax | 46.0 | 49.0 | (6) | % | 149.2 | 126.8 | 18 | % | Income before tax | 70.9 | 46.0 | 54% | 210.8 | 149.2 | 41% | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Income tax expense | Income tax expense | 11.8 | 12.4 | (5) | % | 40.2 | 34.6 | 16 | % | Income tax expense | 21.8 | 11.8 | 85% | 56.0 | 40.2 | 39% | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net income | Net income | $ | 34.2 | $ | 36.6 | (7) | % | $ | 109.0 | $ | 92.2 | 18 | % | Net income | $ | 49.1 | $ | 34.2 | 44% | $ | 154.8 | $ | 109.0 | 42% | ||||||||||||||||||||||||||||||||||||||||||||||
| Balance Sheet information: | Balance Sheet information: | June 30, 2021 | June 30, 2020 | % Change | Balance Sheet information: | June 30, 2022 | June 30, 2021 | % Change | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total assets | Total assets | $ | 16,799.8 | $ | 12,389.5 | 36 | % | Total assets | $ | 19,408.8 | $ | 16,799.8 | 16% | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Payables to lenders under loans | Payables to lenders under loans | $ | 273.7 | $ | 313.8 | (13) | % | Payables to lenders under loans | $ | 508.2 | $ | 273.7 | 86% | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Senior secured borrowings, net | Senior secured borrowings, net | $ | 508.7 | $ | 518.9 | (2) | % | Senior secured borrowings, net | $ | 338.9 | $ | 508.7 | (33)% | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Stockholders’ equity | Stockholders’ equity | $ | 901.4 | $ | 688.8 | 31 | % | Stockholders’ equity | $ | 1,047.3 | $ | 901.4 | 16% | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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The tables below present a disaggregation of consolidateddisplay operating revenues disaggregated across the key products we provide to our clients and select operating data and metrics used by management in evaluating our performance, for the periods indicated.
| All $ amounts are U.S. dollar or U.S. dollar equivalents | All $ amounts are U.S. dollar or U.S. dollar equivalents | Three Months Ended June 30, | Nine Months Ended June 30, | All $ amounts are U.S. dollar or U.S. dollar equivalents | Three Months Ended June 30, | Nine Months Ended June 30, | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2021 | 2020 | % Change | 2021 | 2020 | % Change | 2022 | 2021 | % Change | 2022 | 2021 | % Change | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Operating Revenues (in millions): | Operating Revenues (in millions): | Operating Revenues (in millions): | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Listed derivatives | Listed derivatives | $ | 101.8 | $ | 75.6 | 35% | $ | 297.9 | $ | 245.9 | 21% | Listed derivatives | $ | 106.1 | $ | 101.8 | 4% | $ | 329.7 | $ | 297.9 | 11% | ||||||||||||||||||||||||||||||||||||||||||||||||
| Over-the-counter (“OTC”) derivatives | Over-the-counter (“OTC”) derivatives | 49.7 | 21.4 | 132% | 109.0 | 88.6 | 23% | Over-the-counter (“OTC”) derivatives | 50.2 | 49.7 | 1% | 159.3 | 109.0 | 46% | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Securities | Securities | 137.1 | 136.2 | 1% | 421.5 | 357.5 | 18% | Securities | 154.6 | 137.1 | 13% | 428.6 | 421.5 | 2% | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| FX / Contract For Difference (“CFD”) contracts | FX / Contract For Difference (“CFD”) contracts | 51.8 | 4.8 | 979% | 186.3 | 18.3 | 918% | FX / Contract For Difference (“CFD”) contracts | 86.8 | 51.8 | 68% | 257.9 | 186.3 | 38% | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Global payments | Global payments | 34.1 | 26.8 | 27% | 100.5 | 86.2 | 17% | Global payments | 42.8 | 34.1 | 26% | 124.2 | 100.5 | 24% | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Physical contracts | Physical contracts | 37.2 | 39.3 | (5)% | 110.5 | 83.2 | 33% | Physical contracts | 50.8 | 37.2 | 37% | 132.4 | 110.5 | 20% | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Interest / fees earned on client balances | Interest / fees earned on client balances | 7.0 | 4.6 | 52% | 18.1 | 37.9 | (52)% | Interest / fees earned on client balances | 21.5 | 7.0 | 207% | 40.2 | 18.1 | 122% | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Other | Other | 19.2 | 14.9 | 29% | 52.9 | 53.7 | (1)% | Other | 19.3 | 19.2 | 1% | 60.4 | 52.9 | 14% | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Corporate Unallocated | Corporate Unallocated | (2.0) | 2.3 | (187)% | (1.3) | 11.5 | (111)% | Corporate Unallocated | 2.9 | (2.0) | n/m | 6.9 | (1.3) | n/m | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Eliminations | Eliminations | (4.4) | (3.3) | 33% | (12.4) | (16.6) | (25)% | Eliminations | (6.2) | (4.4) | 41% | (15.6) | (12.4) | 26% | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| $ | 431.5 | $ | 322.6 | 34% | $ | 1,283.0 | $ | 966.2 | 33% | $ | 528.8 | $ | 431.5 | 23% | $ | 1,524.0 | $ | 1,283.0 | 19% | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Volumes and Other Select Data (all $ amounts are U.S. dollar or U.S. dollar equivalents): | Volumes and Other Select Data (all $ amounts are U.S. dollar or U.S. dollar equivalents): | Volumes and Other Select Data (all $ amounts are U.S. dollar or U.S. dollar equivalents): | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Listed derivatives (contracts, 000’s) | Listed derivatives (contracts, 000’s) | 35,756 | 37,627 | (5)% | 110,097 | 119,299 | (8)% | Listed derivatives (contracts, 000’s) | 41,049 | 35,756 | 15% | 119,796 | 110,097 | 9% | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Listed derivatives, average rate per contract (1) | Listed derivatives, average rate per contract (1) | $ | 2.75 | $ | 1.89 | 46% | $ | 2.59 | $ | 1.91 | 36% | Listed derivatives, average rate per contract (1) | $ | 2.41 | $ | 2.75 | (12)% | $ | 2.60 | $ | 2.59 | —% | ||||||||||||||||||||||||||||||||||||||||||||||||
| Average client equity - listed derivatives (millions) | Average client equity - listed derivatives (millions) | $ | 3,967 | $ | 3,027 | 31% | $ | 3,735 | $ | 2,576 | 45% | Average client equity - listed derivatives (millions) | $ | 6,145 | $ | 3,967 | 55% | $ | 5,362 | $ | 3,735 | 44% | ||||||||||||||||||||||||||||||||||||||||||||||||
| OTC derivatives (contracts, 000’s) | OTC derivatives (contracts, 000’s) | 771 | 540 | 43% | 1,889 | 1,638 | 15% | OTC derivatives (contracts, 000’s) | 730 | 771 | (5)% | 2,231 | 1,889 | 18% | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| OTC derivatives, average rate per contract | OTC derivatives, average rate per contract | $ | 64.17 | $ | 39.23 | 64% | $ | 57.27 | $ | 53.62 | 7% | OTC derivatives, average rate per contract | $ | 69.16 | $ | 64.17 | 8% | $ | 71.64 | $ | 57.27 | 25% | ||||||||||||||||||||||||||||||||||||||||||||||||
| Securities average daily volume (“ADV”) (millions) | Securities average daily volume (“ADV”) (millions) | $ | 2,901 | $ | 1,765 | 64% | $ | 2,687 | $ | 1,746 | 54% | Securities average daily volume (“ADV”) (millions) | $ | 6,602 | $ | 2,901 | 128% | $ | 4,252 | $ | 2,687 | 58% | ||||||||||||||||||||||||||||||||||||||||||||||||
Securities rate per million (“RPM”) (2) | Securities rate per million (“RPM”) (2) | $ | 603 | $ | 1,040 | (42)% | $ | 681 | $ | 883 | (23)% | Securities rate per million (“RPM”) (2) | $ | 314 | $ | 603 | (48)% | $ | 434 | $ | 681 | (36)% | ||||||||||||||||||||||||||||||||||||||||||||||||
| Average money market / FDIC sweep client balances (millions) | Average money market / FDIC sweep client balances (millions) | $ | 1,611 | $ | 1,261 | 28% | $ | 1,431 | $ | 1,066 | 34% | Average money market / FDIC sweep client balances (millions) | $ | 1,863 | $ | 1,611 | 16% | $ | 1,730 | $ | 1,431 | 21% | ||||||||||||||||||||||||||||||||||||||||||||||||
FX / CFD contracts ADV (millions) | FX / CFD contracts ADV (millions) | $ | 9,650 | $ | 897 | 976% | $ | 10,490 | $ | 1,354 | 675% | FX / CFD contracts ADV (millions) | $ | 13,147 | $ | 9,650 | 36% | $ | 13,615 | $ | 10,490 | 30% | ||||||||||||||||||||||||||||||||||||||||||||||||
| FX / CFD contracts RPM | FX / CFD contracts RPM | $ | 83 | $ | 84 | (1)% | $ | 93 | $ | 73 | 27% | FX / CFD contracts RPM | $ | 102 | $ | 83 | 23% | $ | 98 | $ | 93 | 5% | ||||||||||||||||||||||||||||||||||||||||||||||||
| Global Payments ADV (millions) | Global Payments ADV (millions) | $ | 55 | $ | 40 | 38% | $ | 53 | $ | 46 | 15% | Global Payments ADV (millions) | $ | 66 | $ | 55 | 20% | $ | 61 | $ | 53 | 15% | ||||||||||||||||||||||||||||||||||||||||||||||||
| Global Payments RPM | Global Payments RPM | $ | 9,786 | $ | 10,650 | (8)% | $ | 10,041 | $ | 9,957 | 1% | Global Payments RPM | $ | 10,652 | $ | 9,786 | 9% | $ | 10,952 | $ | 10,041 | 9% | ||||||||||||||||||||||||||||||||||||||||||||||||
| (1) | Give-up fees, as well as cash and voice brokerage revenues are excluded from the calculation of listed derivatives, average rate per contract. | |||||||||||||
| (2) | Interest income related to securities lending is excluded from the calculation of Securities RPM. | |||||||||||||
Operating Revenues
Three Months Ended June 30, 20212022 Compared to Three Months Ended June 30, 20202021
Operating revenues increased $108.9$97.3 million, or 34%23%, to $528.8 million in the three months ended June 30, 2022 compared to $431.5 million in the three months ended June 30, 2021 compared2021.
Operating revenues derived from listed derivatives increased $4.3 million, or 4%, to $322.6$106.1 million in the three months ended June 30, 2020. The table above displays operating revenues disaggregated across the key products we provide to our clients.
Operating revenues derived from OTC derivatives increased $0.5 million, or 1%, to $50.2 million in the three months ended June 30, 2020. This growth was primarily driven by a 46% increase in the average rate per contract, principally due to an increase in volume from commercial customers, which was partially offset by an overall 5% decline in listed derivative contract volumes.
Operating revenues derived from securities transactions increased $17.5 million, or 13%, to $154.6 million in the three months ended June 30, 2020. This was the result of growth in OTC contract volumes and the average rate per contract of 43% and 64%, respectively in the three months ended June 30, 2021. This growth was principally driven by increased volatility in both grain and energy markets.
Operating revenues derived from FX/CFD contracts increased $47.0$35.0 million, or 979%68%, to $86.8 million in the three months ended June 30, 2022 compared to $51.8 million in the three months ended June 30, 2021, comparedprincipally due to $4.8a 36% increase in FX/CFD contracts ADV as well as a 23% increase in FX/CFD contracts RPM.
34
Operating revenues from global payments increased $8.7 million, or 26%, to $42.8 million in the three months ended June 30, 2020, as a result of an incremental $48.1 million in FX/CFD contracts operating revenues in our Retail segment resulting from the acquisition of Gain which was partially offset by lower FX operating revenues in our Institutional FX prime brokerage business.
Operating revenues derived from physical contracts increased $13.6 million, or 37%, to $26.8$50.8 million in the three months ended June 30, 2020, principally driven by a 38% increase in ADV.
Interest and fee income earned on client balances, which is associated with our listed and OTC derivative,derivatives, correspondent clearing, and independent wealth management product offerings, increased $2.4$14.5 million, or 52%207%, to $21.5 million in the three months ended June 30, 2022 compared to $7.0 million in the three months ended June 30, 2021 compared to $4.6 million in the three months ended June 30, 2020.2021. This was principally driven by an increase in average client equity and average money-market/FDIC sweep client balances of 31%55% and 28%16%, respectively.respectively, as well as an increase in short-term interest rates.
Nine Months Ended June 30, 20212022 Compared to Nine Months Ended June 30, 20202021
Operating revenues increased $316.8$241.0 million, or 33%19%, to $1,524.0 million in the nine months ended June 30, 2022 compared to $1,283.0 million in the nine months ended June 30, 2021 compared2021.
Operating revenues derived from listed derivatives increased $31.8 million, or 11%, to $966.2$329.7 million in the nine months ended June 30, 2020. The table above displays operating revenues disaggregated across the key products we provide to our clients.
Operating revenues in OTC derivatives increased $50.3 million, or 46%, to $159.3 million in the nine months ended June 30, 2020, principally driven by a 36% increase in the average rate per contract, which was partially offset by an 8% decline in listed derivative volumes.
Operating revenue from securities transactions increased $7.1 million, or 2%, to $428.6 million in the nine months ended June 30, 2020. This growth was principally driven by increased volatility in grain and energy markets, which drove a 15% increase in the OTC contract volumes as well as a 7% increase in the average rate per contract.
Operating revenues from FX/CFD contracts increased $71.6 million, or 38%, to $257.9 million in the nine months ended June 30, 2020. This was principally a result of a 54% increase in securities ADV which was partially offset by a 23% decline in RPM.
Operating revenues from global payments increased by $14.3$23.7 million, or 17%24%, to $124.2 million in the nine months ended June 30, 2022 compared to $100.5 million in the nine months ended June 30, 2021, comparedas a result of a 15% increase in ADV and a 9% increase in the RPM traded.
Operating revenues from physical contracts increased $21.9 million, or 20%, to $86.2$132.4 million in the nine months ended June 30, 2020 , principally as a result of a 15% increase in the ADV.
Interest and fee income earned on client balances, which is associated with our listed and OTC derivative businesses, as well as our correspondent clearing and independent wealth management businesses, declined $19.8increased $22.1 million, or 52%122%, to $40.2 million in the nine months ended June 30, 2022 compared to $18.1 million in the nine months ended June 30, 2021, compared to $37.9 million in the nine months ended June 30, 2020, principally as a result of a significant decline in short term interest rates related to the Federal Open Market Committee (“the FOMC”)’s actions to reduce the federal funds rate in March 2020. Partially offsetting the decline in short term interest rates was an increasestrong growth in average client equity and average money-market/FDIC sweep client balances of 45%44% and 34%21%, respectively.
respectively, as well as an increase in short-term interest rates.
Finally, related to the transfer of the majority of the operations of Gain’s United Kingdom (“U.K.”) domiciled subsidiaries into StoneX Financial Ltd., a U.S. dollar denominated entity, which was completed during the quarter ended March 2021, operating revenues for the nine months ended June 30, 2021 includeincluded a $5.0 million loss on derivative positions entered into to mitigate our exposure to the British Pound in the Gain subsidiaries in advance of the transfer as well as a $0.4 million foreign currency gain on revaluation related to the Gain U.K. domiciled subsidiaries. Prior toEach of these items were reflected in operating revenues in the transfer, the assets and liabilities of Gain’s U.K. subsidiaries were subject to translation to the U.S. dollar, and for the period beginning October 2020 through March 31, 2021, the foreign currency translation adjustment related to Gain’s U.K. subsidiaries resulted in a $10.3 million increase in “accumulated other comprehensive income”.Corporate Unallocated segment.
35
Interest and Transactional Expenses
Three Months Ended June 30, 20212022 Compared to Three Months Ended June 30, 20202021
Transaction-based clearing expenses:expenses Transaction-based clearing expenses increased $11.8 million, or 21%, to $67.1 million in the three months ended June 30, 2021 compared to $55.3 million in the three months ended June 30, 2020, and were 16% of operating revenues in the three months ended June 30, 2021 compared to 17% in the three months ended June 30, 2020.
| Three Months Ended June 30, | |||||||||||||||||||||||
| 2022 | 2021 | $ Change | % Change | ||||||||||||||||||||
| Transaction-based clearing expenses | $ | 74.7 | $ | 67.1 | $ | 7.6 | 11% | ||||||||||||||||
| Percentage of operating revenues | 14% | 16% | |||||||||||||||||||||
The increase in expense is principally due to incremental costs in the retail forex business within our Retail segment related to the acquisition of Gain effective August 1, 2020, and also from higher clearing and exchangeADR conversion fees within our Commercial segment resulting fromin the Equity Capital Markets business, an increase in listed derivative contract volumes.volumes, within the Exchange-Traded Futures and Options business, and higher costs in our Global Payments business.
| Three Months Ended June 30, | |||||||||||||||||||||||
| 2022 | 2021 | $ Change | % Change | ||||||||||||||||||||
| Introducing broker commissions | $ | 41.2 | $ | 41.8 | $ | (0.6) | (1)% | ||||||||||||||||
| Percentage of operating revenues | 8% | 10% | |||||||||||||||||||||
The decrease in expense is principally due to $41.8 milliondecreased activity in our Financial Ag & Energy business, partially offset by higher costs in our Exchange-Traded Futures and Options business.
Interest expense
| Three Months Ended June 30, | |||||||||||||||||||||||
| 2022 | 2021 | $ Change | % Change | ||||||||||||||||||||
| Interest expense attributable to: | |||||||||||||||||||||||
| Trading activities: | |||||||||||||||||||||||
| Institutional dealer in fixed income securities | $ | 11.5 | $ | 2.5 | $ | 9.0 | 360% | ||||||||||||||||
| Securities borrowing | 5.7 | 5.8 | (0.1) | (2)% | |||||||||||||||||||
| Short-term financing facilities of subsidiaries and other direct interest of operating segments | 10.9 | 6.2 | 4.7 | 76% | |||||||||||||||||||
| 28.1 | 14.5 | 13.6 | 94% | ||||||||||||||||||||
| Corporate funding | 10.7 | 10.1 | 0.6 | 6% | |||||||||||||||||||
| Total interest expense | $ | 38.8 | $ | 24.6 | $ | 14.2 | 58% | ||||||||||||||||
The increase in interest expense attributable to trading activities is principally due to the three months endedincrease in our fixed income securities business activities within our Institutional segment and increase in average borrowings within our Commercial segment, along with the impact of increases to short-term interest rates since March 2022.
Nine Months Ended June 30, 2021 compared2022 Compared to $24.0 million in the three months endedNine Months Ended June 30, 2020, and were 10% of operating revenues in the three months ended June 30, 2021 compared to 7% in the three months ended June 30, 2020.
Transaction-based clearing expenses
| Nine Months Ended June 30, | |||||||||||||||||||||||
| 2022 | 2021 | $ Change | % Change | ||||||||||||||||||||
| Transaction-based clearing expenses | $ | 222.1 | $ | 207.3 | $ | 14.8 | 7% | ||||||||||||||||
| Percentage of operating revenues | 15% | 16% | |||||||||||||||||||||
The increase in expense is principally due to incrementalhigher clearing and ADR conversion fees in the Equity Capital Markets business, higher costs related to listed derivatives within the Financial Ag & Energy and Exchange-Traded Futures & Options businesses, and higher costs in the retail forex business related to the acquisition of Gain and increased activity in our Independent Wealth Management business within our Retail segment, as well as higher costs within our Commercial segment.Global Payments business.
36
| Nine Months Ended June 30, | |||||||||||||||||||||||
| 2022 | 2021 | $ Change | % Change | ||||||||||||||||||||
| Introducing broker commissions | $ | 122.7 | $ | 120.8 | $ | 1.9 | 2% | ||||||||||||||||
| Percentage of operating revenues | 8% | 9% | |||||||||||||||||||||
Interest expense
| Nine Months Ended June 30, | |||||||||||||||||||||||
| 2022 | 2021 | $ Change | % Change | ||||||||||||||||||||
| Interest expense attributable to: | |||||||||||||||||||||||
| Trading activities: | |||||||||||||||||||||||
| Institutional dealer in fixed income securities | $ | 16.4 | $ | 6.2 | $ | 10.2 | 165% | ||||||||||||||||
| Securities borrowing | 16.3 | 12.9 | 3.4 | 26% | |||||||||||||||||||
| Short-term financing facilities of subsidiaries and other direct interest of operating segments | 25.2 | 16.4 | 8.8 | 54% | |||||||||||||||||||
| 57.9 | 35.5 | 22.4 | 63% | ||||||||||||||||||||
| Corporate funding | 33.1 | 31.1 | 2.0 | 6% | |||||||||||||||||||
| Total interest expense | $ | 91.0 | $ | 66.6 | $ | 24.4 | 37% | ||||||||||||||||
The increase in interest expense attributable to trading activities is principally due to the acquisition of Gain effective August 1, 2020, and also from higher clearing and exchange feesincrease in business activities within our Institutional segment resulting from theand increase in securities ADV, and our Commercial segment, resulting from the increase in listed derivative contract volumes.
Net Operating Revenues
Net operating revenues is one of the key measures used by management to assess the performance of our operating segments.segment performance. 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 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.
The table below presents a disaggregation of consolidated net operating revenues used by management in evaluating our performance, for the periods indicated:
| Three Months Ended June 30, | Nine Months Ended June 30, | ||||||||||||||||||||||||||||||||||
| 2021 | 2020 | % Change | 2021 | 2020 | % Change | ||||||||||||||||||||||||||||||
| Net Operating Revenues (in millions): | |||||||||||||||||||||||||||||||||||
| Listed derivatives | $ | 46.6 | $ | 32.4 | 44 | % | $ | 133.7 | $ | 108.4 | 23 | % | |||||||||||||||||||||||
| OTC derivatives | 49.8 | 21.4 | 133 | % | 109.0 | 88.5 | 23 | % | |||||||||||||||||||||||||||
| Securities | 94.2 | 99.4 | (5) | % | 291.2 | 223.1 | 31 | % | |||||||||||||||||||||||||||
| FX / CFD contracts | 39.4 | 4.3 | 816 | % | 149.6 | 16.0 | 835 | % | |||||||||||||||||||||||||||
| Global Payments | 32.2 | 25.4 | 27 | % | 95.1 | 81.8 | 16 | % | |||||||||||||||||||||||||||
| Physical contracts | 33.4 | 35.9 | (7) | % | 98.3 | 71.3 | 38 | % | |||||||||||||||||||||||||||
| Interest, net / fees earned on client balances | 6.3 | 4.1 | 54 | % | 15.7 | 31.4 | (50) | % | |||||||||||||||||||||||||||
| Other | 13.2 | 9.5 | 39 | % | 39.6 | 32.0 | 24 | % | |||||||||||||||||||||||||||
| Corporate Unallocated | (17.1) | (4.5) | 280 | % | (43.9) | (10.7) | 310 | % | |||||||||||||||||||||||||||
| $ | 298.0 | $ | 227.9 | 31 | % | $ | 888.3 | $ | 641.8 | 38 | % | ||||||||||||||||||||||||
| Three Months Ended June 30, | Nine Months Ended June 30, | ||||||||||||||||||||||||||||||||||
| 2022 | 2021 | % Change | 2022 | 2021 | % Change | ||||||||||||||||||||||||||||||
| Net Operating Revenues (in millions): | |||||||||||||||||||||||||||||||||||
| Listed derivatives | $ | 49.4 | $ | 46.6 | 6% | $ | 162.3 | $ | 133.7 | 21% | |||||||||||||||||||||||||
| OTC derivatives | 50.2 | 49.8 | 1% | 159.3 | 109.0 | 46% | |||||||||||||||||||||||||||||
| Securities | 96.5 | 94.2 | 2% | 273.1 | 291.2 | (6)% | |||||||||||||||||||||||||||||
| FX / CFD contracts | 74.8 | 39.4 | 90% | 221.7 | 149.6 | 48% | |||||||||||||||||||||||||||||
| Global Payments | 39.9 | 32.2 | 24% | 117.1 | 95.1 | 23% | |||||||||||||||||||||||||||||
| Physical contracts | 44.9 | 33.4 | 34% | 117.2 | 98.3 | 19% | |||||||||||||||||||||||||||||
| Interest, net / fees earned on client balances | 18.7 | 6.3 | 197% | 35.3 | 15.7 | 125% | |||||||||||||||||||||||||||||
| Other | 13.2 | 13.2 | —% | 43.6 | 39.6 | 10% | |||||||||||||||||||||||||||||
| Corporate Unallocated | (13.5) | (17.1) | (21)% | (41.4) | (43.9) | (6)% | |||||||||||||||||||||||||||||
| $ | 374.1 | $ | 298.0 | 26% | $ | 1,088.2 | $ | 888.3 | 23% | ||||||||||||||||||||||||||
37
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 June 30, | Nine Months Ended June 30, | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| (in millions) | (in millions) | 2021 | 2020 | % Change | 2021 | 2020 | % Change | (in millions) | 2022 | 2021 | % Change | 2022 | 2021 | % Change | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Compensation and benefits: | Compensation and benefits: | Compensation and benefits: | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Variable compensation and benefits | Variable compensation and benefits | $ | 102.4 | $ | 78.5 | 30 | % | $ | 292.7 | $ | 215.7 | 36 | % | Variable compensation and benefits | $ | 123.9 | $ | 102.4 | 21% | $ | 348.4 | $ | 292.7 | 19% | ||||||||||||||||||||||||||||||||||||||||||||||
| Fixed compensation and benefits | Fixed compensation and benefits | 74.9 | 54.0 | 39 | % | 223.2 | 157.5 | 42 | % | Fixed compensation and benefits | 78.3 | 74.9 | 5% | 235.9 | 223.2 | 6% | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 177.3 | 132.5 | 34 | % | 515.9 | 373.2 | 38 | % | 202.2 | 177.3 | 14% | 584.3 | 515.9 | 13% | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Other expenses: | Other expenses: | Other expenses: | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Trading systems and market information | Trading systems and market information | 14.4 | 11.8 | 22 | % | 42.9 | 33.4 | 28 | % | Trading systems and market information | 16.0 | 14.4 | 11% | 49.0 | 42.9 | 14% | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Professional fees | Professional fees | 9.5 | 6.1 | 56 | % | 27.8 | 16.8 | 65 | % | Professional fees | 13.2 | 9.5 | 39% | 38.9 | 27.8 | 40% | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Non-trading technology and support | Non-trading technology and support | 11.3 | 6.9 | 64 | % | 32.8 | 18.8 | 74 | % | Non-trading technology and support | 12.9 | 11.3 | 14% | 38.7 | 32.8 | 18% | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Occupancy and equipment rental | Occupancy and equipment rental | 9.7 | 5.4 | 80 | % | 25.8 | 15.3 | 69 | % | Occupancy and equipment rental | 9.2 | 9.7 | (5)% | 26.7 | 25.8 | 3% | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Selling and marketing | Selling and marketing | 8.1 | 0.5 | 1,520 | % | 23.4 | 6.1 | 284 | % | Selling and marketing | 16.0 | 8.1 | 98% | 41.3 | 23.4 | 76% | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Travel and business development | Travel and business development | 1.3 | 0.7 | 86 | % | 2.8 | 8.4 | (67) | % | Travel and business development | 4.9 | 1.3 | 277% | 10.8 | 2.8 | 286% | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Communications | Communications | 2.3 | 1.7 | 35 | % | 7.0 | 4.8 | 46 | % | Communications | 2.0 | 2.3 | (13)% | 6.0 | 7.0 | (14)% | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Depreciation and amortization | Depreciation and amortization | 9.7 | 4.4 | 120 | % | 26.7 | 12.5 | 114 | % | Depreciation and amortization | 11.7 | 9.7 | 21% | 32.1 | 26.7 | 20% | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Bad debts | 1.3 | 1.8 | (28) | % | 3.7 | 6.2 | (40) | % | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Bad debt (recovery) expense, net | Bad debt (recovery) expense, net | (0.7) | 1.3 | (154)% | 11.4 | 3.7 | 208% | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Other | Other | 10.7 | 7.1 | 51 | % | 33.9 | 19.6 | 73 | % | Other | 15.8 | 10.7 | 48% | 44.6 | 33.9 | 32% | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 78.3 | 46.4 | 69 | % | 226.8 | 141.9 | 60 | % | 101.0 | 78.3 | 29% | 299.5 | 226.8 | 32% | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total compensation and other expenses | Total compensation and other expenses | $ | 255.6 | $ | 178.9 | 43 | % | $ | 742.7 | $ | 515.1 | 44 | % | Total compensation and other expenses | $ | 303.2 | $ | 255.6 | 19% | $ | 883.8 | $ | 742.7 | 19% | ||||||||||||||||||||||||||||||||||||||||||||||
Three Months Ended June 30, 20212022 Compared to Three Months Ended June 30, 20202021
Compensation and Other Expenses: Compensation and other expenses increased $76.7$47.6 million, or 43%19%, to $303.2 million in the three months ended June 30, 2022 compared to $255.6 million in the three months ended June 30, 2021 compared to $178.9 million in the three months ended June 30, 2020,2021.
Compensation and Benefits:
| Three Months Ended June 30, | |||||||||||||||||||||||
| (in millions) | 2022 | 2021 | $ Change | % Change | |||||||||||||||||||
| Compensation and benefits: | |||||||||||||||||||||||
| Variable compensation and benefits | |||||||||||||||||||||||
| Front office | $ | 104.7 | $ | 89.3 | $ | 15.4 | 17% | ||||||||||||||||
| Administrative, executive, and centralized and local operations | 19.2 | 13.1 | 6.1 | 47% | |||||||||||||||||||
| Total variable compensation and benefits | 123.9 | 102.4 | 21.5 | 21% | |||||||||||||||||||
| Variable compensation and benefits as a percentage of net operating revenues | 33% | 34% | |||||||||||||||||||||
| Fixed compensation and benefits: | |||||||||||||||||||||||
| Non-variable salaries | 57.5 | 50.4 | 7.1 | 14% | |||||||||||||||||||
| Employee benefits and other compensation, excluding share-based compensation | 16.3 | 20.7 | (4.4) | (21)% | |||||||||||||||||||
| Share-based compensation | 4.5 | 3.8 | 0.7 | 18% | |||||||||||||||||||
| Total fixed compensation and benefits | 78.3 | 74.9 | 3.4 | 5% | |||||||||||||||||||
| Total compensation and benefits | 202.2 | 177.3 | 24.9 | 14% | |||||||||||||||||||
| Total compensation and benefits as a percentage of operating revenues | 38% | 41% | |||||||||||||||||||||
| Number of employees, end of period | 3,484 | 3,150 | 334 | 11% | |||||||||||||||||||
Employee benefits and other compensation, excluding share-based compensation, decreased principally due to the Gain acquisitiona decrease in the fourth quarter of fiscal 2020.
Other Expenses: Other non-compensation expenses increased $1.4$22.7 million, or 58%,29% to $3.8$101.0 million in the three months ended June 30, 20212022 compared to $2.4 million in the three months ended June 30, 2020.
Trading systems and market information increased $2.6 million, principally due to incremental costs in the retail forex business acquired as part of the Gain acquisition in the fourth quarter of fiscal 2020. Professional fees increased $3.4$1.6 million, principally due to higher costs in the Retail Forex and Debt Capital Markets businesses.
Professional fees increased $3.7 million, principally due to higher legal and other consulting fees.
Selling and legal fees, including incrementalmarketing costs from recent acquisitions. Non-trading technology andincreased $7.9 million, principally due to increased campaigns related to our Retail Forex business.
38
Depreciation and amortization increased $5.3$2.0 million, principally due to an increase in IT hardware andthe incremental depreciation expense from internally developed software and intangibles associated with recent acquisitions. Other expenses increased $3.6 million, principally due to incremental costs from recent acquisitions most notably related to higher non-income tax, recruiting, and insurance costs.placed into service.
Bad debtsdebt expense, net decreased $0.5$2.0 million over the prior year. During the three months ended June 30, 2022, we recorded net recoveries of bad debts of $0.7 million, principally due to net recoveries of $0.4 million in the Precious Metals business within our Commercial segment. Additionally, we recorded recoveries of $0.6 million of bad debt expense within the Institutional segment, including $0.5 million of client receivables in the Equity Capital Markets business and $0.1 million in client trading account deficits in the Exchange-Traded Futures and Options business. We also recorded bad debt of $0.3 million within the Retail segment. During the three months ended June 30, 2021, bad debts weredebt expense, net was $1.3 million, principally due to client trading account deficits of $1.2 million within ourthe Commercial segment and $0.4 million within our Institutional segment, partially offset by recoveries of $0.3 million within our Retail segment. During the three months ended June 30, 2020, provision for bad debts were $3.5 million, principally due to exchange-traded client trading account deficits of $2.4 million in our Institutional segment and OTC client trading account deficits of $1.1 million in our Commercial segment, partially offset by the recovery of a $1.7 million OTC client trading account deficit within our Commercial segment.
Gain on AcquisitionsAcquisition and Other Gains: The results of the three months ended June 30, 2021 includeincluded a gain of $3.3 million related to an adjustment to the liabilities assumed as part of the Gain acquisition initially determined values, as of August 1, 2020. We also recognized a net gain on the disposal of fixed assets in the three months ended June 30, 2021.
Provision for Taxes: The effective income tax rate was 31% in the three months ended June 30, 2022 compared to 26% in the three months ended June 30, 2021. For the three months ended June 30, 2022 and 2021, comparedthe effective rate was higher than the U.S. federal statutory rate of 21% due to 25%U.S. state and local taxes, global intangible low taxed income (“GILTI”), U.S. and foreign permanent differences, and the amount of foreign earnings taxed at higher tax rates. The effective tax rate was higher in the three months ended June 30, 2020. For2022 compared to June 30, 2021 as a result of the mix in the amount of foreign earnings taxed a higher tax rates, as well as the three months ended June 30, 2021 including the non-taxable gain on acquisition discussed above.
Nine Months Ended June 30, 2022 Compared to Nine Months Ended June 30, 2021
Compensation and 2020,Other Expenses: Compensation and other expenses increased $141.1 million, or 19%, to $883.8 million in the nine months ended June 30, 2022 compared to $742.7 million in the nine months ended June 30, 2021.
Compensation and Benefits:
| Nine Months Ended June 30, | |||||||||||||||||||||||
| (in millions) | 2022 | 2021 | $ Change | % Change | |||||||||||||||||||
| Compensation and benefits: | |||||||||||||||||||||||
| Variable compensation and benefits | |||||||||||||||||||||||
| Front office | $ | 300.9 | $ | 258.4 | $ | 42.5 | 16% | ||||||||||||||||
| Administrative, executive, and centralized and local operations | 47.5 | 34.3 | 13.2 | 38% | |||||||||||||||||||
| Total variable compensation and benefits | 348.4 | 292.7 | 55.7 | 19% | |||||||||||||||||||
| Variable compensation and benefits as a percentage of net operating revenues | 32% | 33% | |||||||||||||||||||||
| Fixed compensation and benefits: | |||||||||||||||||||||||
| Non-variable salaries | 166.5 | 150.7 | 15.8 | 10% | |||||||||||||||||||
| Employee benefits and other compensation, excluding share-based compensation | 56.6 | 62.2 | (5.6) | (9)% | |||||||||||||||||||
| Share-based compensation | 12.8 | 10.3 | 2.5 | 24% | |||||||||||||||||||
| Total fixed compensation and benefits | 235.9 | 223.2 | 12.7 | 6% | |||||||||||||||||||
| Total compensation and benefits | $ | 584.3 | $ | 515.9 | $ | 68.4 | 13% | ||||||||||||||||
| Total compensation and benefits as a percentage of operating revenues | 38% | 40% | |||||||||||||||||||||
| Number of employees, end of period | 3,484 | 3,150 | 334 | 11% | |||||||||||||||||||
Employee benefits and other compensation, excluding share-based compensation, decreased principally due to lower severance costs. Share-based compensation is a component of the fixed portion, and includes stock option and restricted stock expense.
Other Expenses: Other non-compensation expenses increased $72.7 million, or 32%, to $299.5 million in the nine months ended June 30, 2022 compared to $226.8 million in the nine months ended June 30, 2021.
Trading systems and market information costs increased $6.1 million, principally due to higher costs in the Retail Forex business and in the Debt and Equity Capital Markets businesses within our Institutional segment.
Professional fees increased $11.1 million, principally due to higher legal fees.
39
Non-trading technology and support increased $5.9 million, principally due to higher non-trading software implementation costs related to various IT systems.
Selling and marketing costs increased $17.9 million, principally due to increased campaigns related to our Retail Forex business, as well as costs of holding our bi-annual global sales and strategy meeting in March 2022.
Travel and business development increased $8.0 million, principally due to several business line specific development meetings, as well as increases along all business lines with the lifting of certain social distancing and travel restrictions, following periods of limited travel due to responses by governments and societies to the COVID-19 pandemic.
Depreciation and amortization increased $5.4 million, principally due to the incremental depreciation expense from internally developed software placed into service.
Other expenses increased $10.7 million, principally due to higher insurance costs, non-income taxes, non-variable direct business related costs, and non-compensation employee based expenses.
Bad debt expense, net of recovery increased $7.7 million over the prior year. During the nine months ended June 30, 2022, bad debt expense, net of recovery was $11.4 million, principally related to client trading account deficits in our Commercial, Institutional, and Retail segments of $8.8 million, $1.6 million, and $1.0 million, respectively. During the nine months ended June 30, 2021, bad debts were $3.7 million, principally due to client trading account deficits of $2.6 million within our Commercial segment, $0.6 million within our Retail segment, and $0.5 million within our Institutional segment.
Gain on Acquisition and Other Gains: The results of the nine months ended June 30, 2022 include a nonrecurring gain of $6.4 million related to a foreign exchange antitrust class action settlement received in March 2022. The results of the nine months ended June 30, 2021 included a gain of $3.3 million related to an adjustment to the liabilities assumed as part of the Gain acquisition initially determined values, as of August 1, 2020. We also recognized a net gain on the disposal of fixed assets in the nine months ended June 30, 2021.
Provision for Taxes: The effective income tax rate was 27% in the nine months ended June 30, 2022 and 2021. For the nine months ended June 30, 2022 and 2021, the effective rate was higher than the U.S. federal statutory rate of 21% due to U.S. state and local taxes, global intangible low taxed income (“GILTI”), U.S. and foreign permanent differences, and the amount of foreign earnings taxed at higher tax rates.
Variable vs. Fixed Expenses
The table below sets forth our variable expenses and non-variable expenses as a percentage of total non-interest expenses for the periods indicted.indicated.
| Three Months Ended June 30, | Nine Months Ended June 30, | Three Months Ended June 30, | Nine Months Ended June 30, | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| (in millions) | (in millions) | 2021 | % of Total | 2020 | % of Total | 2021 | % of Total | 2020 | % of Total | (in millions) | 2022 | % of Total | 2021 | % of Total | 2022 | % of Total | 2021 | % of Total | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Variable compensation and benefits | Variable compensation and benefits | $ | 102.4 | 28 | % | $ | 78.5 | 30 | % | $ | 292.7 | 27 | % | $ | 215.7 | 29 | % | Variable compensation and benefits | $ | 123.9 | 29% | $ | 102.4 | 28% | $ | 348.4 | 28% | $ | 292.7 | 27% | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Transaction-based clearing expenses | Transaction-based clearing expenses | 67.1 | 19 | % | 55.3 | 22 | % | 207.3 | 20 | % | 165.4 | 22 | % | Transaction-based clearing expenses | 74.7 | 18% | 67.1 | 19% | 222.1 | 19% | 207.3 | 20% | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Introducing broker commissions | Introducing broker commissions | 41.8 | 11 | % | 24.0 | 9 | % | 120.8 | 11 | % | 79.8 | 10 | % | Introducing broker commissions | 41.2 | 10% | 41.8 | 11% | 122.7 | 10% | 120.8 | 11% | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total variable expenses | Total variable expenses | 211.3 | 58 | % | 157.8 | 61 | % | 620.8 | 58 | % | 460.9 | 61 | % | Total variable expenses | 239.8 | 57% | 211.3 | 58% | 693.2 | 57% | 620.8 | 58% | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Fixed compensation and benefits | Fixed compensation and benefits | 74.9 | 21 | % | 54.0 | 21 | % | 223.2 | 21 | % | 157.5 | 20 | % | Fixed compensation and benefits | 78.3 | 19% | 74.9 | 21% | 235.9 | 19% | 223.2 | 21% | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Other fixed expenses | Other fixed expenses | 77.0 | 21 | % | 44.6 | 17 | % | 223.1 | 21 | % | 135.7 | 18 | % | Other fixed expenses | 101.7 | 24% | 77.0 | 21% | 288.1 | 23% | 223.1 | 21% | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Bad debts | 1.3 | — | % | 1.8 | 1 | % | 3.7 | — | % | 6.2 | 1 | % | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Bad debt (recovery) expense, net | Bad debt (recovery) expense, net | (0.7) | —% | 1.3 | —% | 11.4 | 1% | 3.7 | —% | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total non-variable expenses | Total non-variable expenses | 153.2 | 42 | % | 100.4 | 39 | % | 450.0 | 42 | % | 299.4 | 39 | % | Total non-variable expenses | 179.3 | 43% | 153.2 | 42% | 535.4 | 43% | 450.0 | 42% | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total non-interest expenses | Total non-interest expenses | $ | 364.5 | 100 | % | $ | 258.2 | 100 | % | $ | 1,070.8 | 100 | % | $ | 760.3 | 100 | % | Total non-interest expenses | $ | 419.1 | 100% | $ | 364.5 | 100% | $ | 1,228.6 | 100% | $ | 1,070.8 | 100% | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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. We seek to make our non-interest expenses variable to the greatest extent possible, and to keep our fixed costs as low as possible.
40
Segment Information
| StoneX Group Inc. | ||||||||||||||||||||||||||||||||
| Commercial | Institutional | Retail | Global Payments | |||||||||||||||||||||||||||||
| Primary Activities: | Primary Activities: | Primary Activities: | Primary Activities: | |||||||||||||||||||||||||||||
| Financial Ag & Energy | Equity Capital Markets | Retail Forex | Global Payments | |||||||||||||||||||||||||||||
| Physical Ag & Energy | Debt Capital Markets | Retail Precious Metals | Payment Technology Services | |||||||||||||||||||||||||||||
| Precious Metals | FX Prime Brokerage | Independent Wealth Management | ||||||||||||||||||||||||||||||
| Derivative Voice Brokerage | Exchange-Traded Futures & Options | |||||||||||||||||||||||||||||||
| Correspondent Clearing | ||||||||||||||||||||||||||||||||
Operating revenues, net operating revenues, net contribution and segment income are some of the key measures used by management to assess the performance of each segment and for decisions regarding the allocation of our resources. Operating revenues are calculated as total revenues less cost of sales of physical commodities.
Net operating revenue isrevenues are calculated as operating revenuerevenues less transaction-based clearing expenses, introducing broker commissions and interest expense.
Net contribution is calculated as net operating revenues less variable compensation. Variable compensation paid to risk management consultants and traders generally represents a fixed percentage that can vary by revenue type, of an amount equal to revenues generated, and in some cases, revenues generated less transaction-based clearing expenses, base salaries and an overhead allocation.
Segment income is calculated as net contribution less non-variable direct segment costs. These non-variable direct expenses include trader base compensation and benefits, operational charges, trading systems and market information, professional fees, travel and business development, communications, bad debts, trade errors and direct marketing expenses.
41
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 June 30, | Nine Months Ended June 30, | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| (in millions) | (in millions) | 2021 | % of Operating Revenues | 2020 | % of Operating Revenues | 2021 | % of Operating Revenues | 2020 | % of Operating Revenues | (in millions) | 2022 | % of Operating Revenues | 2021 | % of Operating Revenues | 2022 | % of Operating Revenues | 2021 | % of Operating Revenues | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Revenues: | Revenues: | Revenues: | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Sales of physical commodities | Sales of physical commodities | $ | 9,785.9 | $ | 7,944.5 | $ | 29,473.7 | $ | 38,939.4 | Sales of physical commodities | $ | 18,431.0 | $ | 9,785.9 | $ | 48,214.1 | $ | 29,473.7 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Principal gains, net | Principal gains, net | 236.2 | 161.9 | 708.1 | 441.5 | Principal gains, net | 295.2 | 236.2 | 869.8 | 708.1 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Commission and clearing fees | Commission and clearing fees | 124.4 | 96.6 | 374.5 | 301.1 | Commission and clearing fees | 127.3 | 124.4 | 382.8 | 374.5 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Consulting, management, and account fees | Consulting, management, and account fees | 20.9 | 17.3 | 63.9 | 60.2 | Consulting, management, and account fees | 26.9 | 20.9 | 74.6 | 63.9 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Interest income | Interest income | 31.1 | 24.1 | 80.9 | 117.6 | Interest income | 53.8 | 31.1 | 122.4 | 80.9 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total revenues | Total revenues | 10,198.5 | 8,244.4 | 30,701.1 | 39,859.8 | Total revenues | 18,934.2 | 10,198.5 | 49,663.7 | 30,701.1 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Cost of sales of physical commodities | Cost of sales of physical commodities | 9,760.6 | 7,920.8 | 29,404.4 | 38,888.5 | Cost of sales of physical commodities | 18,402.1 | 9,760.6 | 48,131.0 | 29,404.4 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Operating revenues | Operating revenues | 437.9 | 100% | 323.6 | 100% | 1,296.7 | 100% | 971.3 | 100% | Operating revenues | 532.1 | 100% | 437.9 | 100% | 1,532.7 | 100% | 1,296.7 | 100% | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Transaction-based clearing expenses | Transaction-based clearing expenses | 66.1 | 15% | 54.9 | 17% | 206.2 | 16% | 164.4 | 17% | Transaction-based clearing expenses | 74.9 | 14% | 66.1 | 15% | 221.2 | 14% | 206.2 | 16% | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Introducing broker commissions | Introducing broker commissions | 41.8 | 10% | 24.0 | 7% | 120.8 | 9% | 79.8 | 8% | Introducing broker commissions | 41.2 | 8% | 41.8 | 10% | 122.9 | 8% | 120.8 | 9% | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Interest expense | Interest expense | 14.9 | 3% | 12.3 | 4% | 37.5 | 3% | 74.6 | 8% | Interest expense | 28.4 | 5% | 14.9 | 3% | 59.0 | 4% | 37.5 | 3% | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net operating revenues | Net operating revenues | 315.1 | 232.4 | 932.2 | 652.5 | Net operating revenues | 387.6 | 315.1 | 1,129.6 | 932.2 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Variable direct compensation and benefits | Variable direct compensation and benefits | 89.9 | 21% | 68.8 | 21% | 260.1 | 20% | 188.2 | 19% | Variable direct compensation and benefits | 105.7 | 20% | 89.9 | 21% | 303.0 | 20% | 260.1 | 20% | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net contribution | Net contribution | 225.2 | 163.6 | 672.1 | 464.3 | Net contribution | 281.9 | 225.2 | 826.6 | 672.1 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Fixed compensation and benefits | Fixed compensation and benefits | 40.6 | 29.0 | 121.9 | 82.4 | Fixed compensation and benefits | 45.0 | 40.6 | 130.5 | 121.9 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Other fixed expenses | Other fixed expenses | 50.1 | 22.1 | 139.1 | 71.9 | Other fixed expenses | 66.5 | 50.1 | 185.2 | 139.1 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Bad debts | 1.3 | 1.8 | 3.7 | 6.2 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Bad debt (recovery) expense, net | Bad debt (recovery) expense, net | (0.7) | 1.3 | 11.4 | 3.7 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total non-variable direct expenses | Total non-variable direct expenses | 92.0 | 21% | 52.9 | 16% | 264.7 | 20% | 160.5 | 17% | Total non-variable direct expenses | 110.8 | 21% | 92.0 | 21% | 327.1 | 21% | 264.7 | 20% | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Other gain | Other gain | — | — | 6.4 | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Segment income | Segment income | $ | 133.2 | $ | 110.7 | $ | 407.4 | $ | 303.8 | Segment income | $ | 171.1 | $ | 133.2 | $ | 505.9 | $ | 407.4 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Three Months Ended June 30, 20212022 Compared to Three Months Ended June 30, 20202021
Net contribution for all of our business segments increased $61.6$56.7 million, or 38%25%, to $281.9 million in the three months ended June 30, 2022 compared to $225.2 million in the three months ended June 30, 2021 compared2021. Segment income increased $37.9 million, or 28%, to $163.6$171.1 million in the three months ended June 30, 2020. Segment income increased $22.5 million, or 20%,2022 compared to $133.2 million in the three months ended June 30, 2021 compared to $110.7 million in the three months ended June 30, 2020.2021.
Nine Months Ended June 30, 20212022 Compared to Nine Months Ended June 30, 20202021
Net contribution for all of our business segments increased $207.8$154.5 million, or 45%23%, to $672.1$826.6 million in the nine months ended June 30, 20212022 compared to $464.3$672.1 million in the nine months ended June 30, 20202021. Segment income increased $103.6$98.5 million, or 34%24%, to $407.4$505.9 million in the nine months ended June 30, 20212022 compared to $303.8$407.4 million in the nine months ended June 30, 20202021.
Commercial
We offer our commercial clients a comprehensive array of products and services, including risk management and hedging services, execution and clearing of exchange-traded and OTC products, voice brokerage, market intelligence and physical trading, as well as commodity financing and logistics services. We believe our ability to provideproviding these high-value-added products and services differentiates us from our competitors and maximizes our opportunity to retain our clients.
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The tables below present the financial performance, a disaggregation of operating revenues, and select operating data and metrics used by management in evaluating the performance of the Commercial segment, for the periods indicated.
| Three Months Ended June 30, | Nine Months Ended June 30, | Three Months Ended June 30, | Nine Months Ended June 30, | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| (in millions) | (in millions) | 2021 | 2020 | % Change | 2021 | 2020 | % Change | (in millions) | 2022 | 2021 | % Change | 2022 | 2021 | % Change | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Revenues: | Revenues: | Revenues: | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Sales of physical commodities | Sales of physical commodities | $ | 9,315.9 | $ | 7,884.5 | 18% | $ | 28,479.4 | $ | 38,730.1 | (26)% | Sales of physical commodities | $ | 18,224.3 | $ | 9,315.9 | 96% | $ | 47,551.9 | $ | 28,479.4 | 67% | ||||||||||||||||||||||||||||||||||||||||||||||||
| Principal gains, net | Principal gains, net | 75.6 | 42.7 | 77% | 187.0 | 142.6 | 31% | Principal gains, net | 84.4 | 75.6 | 12% | 260.2 | 187.0 | 39% | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Commission and clearing fees | Commission and clearing fees | 47.8 | 33.1 | 44% | 136.2 | 104.3 | 31% | Commission and clearing fees | 41.9 | 47.8 | (12)% | 129.9 | 136.2 | (5)% | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Consulting, management and account fees | Consulting, management and account fees | 4.8 | 4.6 | 4% | 14.8 | 14.3 | 3% | Consulting, management and account fees | 5.8 | 4.8 | 21% | 16.2 | 14.8 | 9% | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Interest income | Interest income | 5.2 | 3.2 | 63% | 13.8 | 20.5 | (33)% | Interest income | 12.3 | 5.2 | 137% | 26.6 | 13.8 | 93% | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total revenues | Total revenues | 9,449.3 | 7,968.1 | 19% | 28,831.2 | 39,011.8 | (26)% | Total revenues | 18,368.7 | 9,449.3 | 94% | 47,984.8 | 28,831.2 | 66% | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Cost of sales of physical commodities | Cost of sales of physical commodities | 9,297.1 | 7,863.8 | 18% | 28,429.1 | 38,688.1 | (27)% | Cost of sales of physical commodities | 18,198.5 | 9,297.1 | 96% | 47,477.9 | 28,429.1 | 67% | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Operating revenues | Operating revenues | 152.2 | 104.3 | 46% | 402.1 | 323.7 | 24% | Operating revenues | 170.2 | 152.2 | 12% | 506.9 | 402.1 | 26% | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Transaction-based clearing expenses | Transaction-based clearing expenses | 13.1 | 10.0 | 31% | 40.3 | 30.7 | 31% | Transaction-based clearing expenses | 14.8 | 13.1 | 13% | 42.3 | 40.3 | 5% | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Introducing broker commissions | Introducing broker commissions | 10.7 | 5.0 | 114% | 26.2 | 17.7 | 48% | Introducing broker commissions | 8.4 | 10.7 | (21)% | 24.2 | 26.2 | (8)% | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Interest expense | Interest expense | 3.4 | 2.7 | 26% | 9.8 | 10.7 | (8)% | Interest expense | 5.1 | 3.4 | 50% | 13.0 | 9.8 | 33% | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net operating revenues | Net operating revenues | 125.0 | 86.6 | 44% | 325.8 | 264.6 | 23% | Net operating revenues | 141.9 | 125.0 | 14% | 427.4 | 325.8 | 31% | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Variable direct compensation and benefits | Variable direct compensation and benefits | 38.1 | 27.4 | 39% | 100.3 | 83.5 | 20% | Variable direct compensation and benefits | 40.0 | 38.1 | 5% | 125.2 | 100.3 | 25% | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net contribution | Net contribution | 86.9 | 59.2 | 47% | 225.5 | 181.1 | 25% | Net contribution | 101.9 | 86.9 | 17% | 302.2 | 225.5 | 34% | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Fixed compensation and benefits | Fixed compensation and benefits | 12.6 | 12.3 | 2% | 37.3 | 36.2 | 3% | Fixed compensation and benefits | 13.0 | 12.6 | 3% | 37.6 | 37.3 | 1% | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Other fixed expenses | Other fixed expenses | 12.7 | 10.3 | 23% | 37.5 | 33.8 | 11% | Other fixed expenses | 16.8 | 12.7 | 32% | 47.7 | 37.5 | 27% | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Bad debts | 1.2 | (0.6) | (300)% | 2.6 | 3.5 | (26)% | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Bad debt (recovery) expense, net | Bad debt (recovery) expense, net | (0.4) | 1.2 | n/m | 8.8 | 2.6 | 238% | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Non-variable direct expenses | Non-variable direct expenses | 26.5 | 22.0 | 20% | 77.4 | 73.5 | 5% | Non-variable direct expenses | 29.4 | 26.5 | 11% | 94.1 | 77.4 | 22% | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Segment income | Segment income | $ | 60.4 | $ | 37.2 | 62% | $ | 148.1 | $ | 107.6 | 38% | Segment income | $ | 72.5 | $ | 60.4 | 20% | $ | 208.1 | $ | 148.1 | 41% | ||||||||||||||||||||||||||||||||||||||||||||||||
| Three Months Ended June 30, | Nine Months Ended June 30, | Three Months Ended June 30, | Nine Months Ended June 30, | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| (in millions) | (in millions) | 2021 | 2020 | % Change | 2021 | 2020 | % Change | (in millions) | 2022 | 2021 | % Change | 2022 | 2021 | % Change | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Operating revenues (in millions): | Operating revenues (in millions): | Operating revenues (in millions): | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Listed derivatives | Listed derivatives | $ | 60.6 | $ | 40.2 | 51% | $ | 169.8 | $ | 133.7 | 27% | Listed derivatives | $ | 56.9 | $ | 60.6 | (6)% | $ | 187.6 | $ | 169.8 | 10% | ||||||||||||||||||||||||||||||||||||||||||||||||
| OTC derivatives | OTC derivatives | 49.7 | 21.3 | 133% | 108.9 | 88.4 | 23% | OTC derivatives | 50.2 | 49.7 | 1% | 159.3 | 108.9 | 46% | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Physical contracts | Physical contracts | 32.5 | 36.3 | (10)% | 97.7 | 74.2 | 32% | Physical contracts | 46.1 | 32.5 | 42% | 120.7 | 97.7 | 24% | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Interest / fees earned on client balances | Interest / fees earned on client balances | 4.2 | 1.9 | 121% | 9.7 | 12.6 | (23)% | Interest / fees earned on client balances | 11.4 | 4.2 | 171% | 23.1 | 9.7 | 138% | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Other | Other | 5.2 | 4.6 | 13% | 16.0 | 14.8 | 8% | Other | 5.6 | 5.2 | 8% | 16.2 | 16.0 | 1% | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| $ | 152.2 | $ | 104.3 | 46% | $ | 402.1 | $ | 323.7 | 24% | $ | 170.2 | $ | 152.2 | 12% | $ | 506.9 | $ | 402.1 | 26% | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Select data (all $ amounts are U.S. dollar or U.S. dollar equivalents): | Select data (all $ amounts are U.S. dollar or U.S. dollar equivalents): | Select data (all $ amounts are U.S. dollar or U.S. dollar equivalents): | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Listed derivatives (contracts, 000’s) | Listed derivatives (contracts, 000’s) | 7,882 | 6,674 | 18% | 23,885 | 22,492 | 6% | Listed derivatives (contracts, 000’s) | 7,482 | 7,882 | (5)% | 22,986 | 23,885 | (4)% | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Listed derivatives, average rate per contract (1) | Listed derivatives, average rate per contract (1) | $ | 7.44 | $ | 5.51 | 35% | $ | 6.77 | $ | 5.31 | 27% | Listed derivatives, average rate per contract (1) | $ | 7.26 | $ | 7.44 | (2)% | $ | 7.75 | $ | 6.77 | 14% | ||||||||||||||||||||||||||||||||||||||||||||||||
| Average client equity - listed derivatives (millions) | Average client equity - listed derivatives (millions) | $ | 1,780 | $ | 1,118 | 59% | $ | 1,600 | $ | 989 | 62% | Average client equity - listed derivatives (millions) | $ | 2,585 | $ | 1,780 | 45% | $ | 2,104 | $ | 1,600 | 32% | ||||||||||||||||||||||||||||||||||||||||||||||||
| OTC derivatives (contracts, 000’s) | OTC derivatives (contracts, 000’s) | 771 | 540 | 43% | 1,889 | 1,638 | 15% | OTC derivatives (contracts, 000’s) | 730 | 771 | (5)% | 2,231 | 1,889 | 18% | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| OTC derivatives, average rate per contract | OTC derivatives, average rate per contract | $ | 64.17 | $ | 39.23 | 64% | $ | 57.27 | $ | 53.62 | 7% | OTC derivatives, average rate per contract | $ | 69.16 | $ | 64.17 | 8% | $ | 71.64 | $ | 57.27 | 25% | ||||||||||||||||||||||||||||||||||||||||||||||||
| (1) | Give-up fees, as well as cash and voice brokerage revenues are excluded from the calculation of listed derivatives, average rate per contract. | |||||||||||||
Three Months Ended June 30, 20212022 Compared to Three Months Ended June 30, 20202021
Operating revenues increased $47.9$18.0 million, or 46%12%, to $170.2 million in the three months ended June 30, 2022 compared to $152.2 million in the three months ended June 30, 2021 compared2021. Net operating revenues increased $16.9 million, or 14%, to $104.3$141.9 million in the three months ended June 30, 2020. Net operating revenues increased $38.4 million, or 44%,2022 compared to $125.0 million in the three months ended June 30, 2021 compared2021.
Operating revenues derived from listed derivatives declined $3.7 million, or 6%, to $86.6$56.9 million in the three months ended June 30, 2020.
Operating revenues derived from OTC derivatives increased $0.5 million, or 1%, to $50.2 million in the three months ended June 30, 2020. This increase was principally due to a 35% increase in the average rate per contract and a 18% increase in listed derivatives contract volumes as a result of increased volatility in agricultural and base metal markets.
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increase in the average rate per contract which was mostly offset by a 5% decline in OTC derivative volumes compared to $21.3the three months ended June 30, 2021.
Operating revenues derived from physical contracts increased $13.6 million, or 42%, to $46.1 million in the three months ended June 30, 2020. This increase was principally due to
Interest and fee income earned on client balances increased $2.3$7.2 million, or 121%171%, to $11.4 million in the three months ended June 30, 2022 compared to $4.2 million in the three months ended June 30, 2021 compared to $1.9 million in the three months ended June 30, 2020 principally due toas a 59%result of a 45% increase in average client equity to $1,780 million.$2,585 million as well as an increase in short term interest rates.
Variable expenses, excluding interest, expressed as a percentage of operating revenues were 41%37% in both the three months ended June 30, 2021 and 2020.2022 compared to 41% in the three months ended June 30, 2021. The decline in variable expenses as a percentage of operating revenues was principally due to a change in product mix as well as the increase in interest/fees earned on client balances during the three months ended June 30, 2022.
Segment income increased $23.2$12.1 million, or 62%20%, to $72.5 million in the three months ended June 30, 2022 compared to $60.4 million in the three months ended June 30, 2021, compared to $37.2 million in the three months ended June 30, 2020, principally due to the growth in operating revenues, which was partially offset by a $1.8$2.9 million increase in non-variable direct expenses. The increase in non-variable direct expenses was principally driven by increases in selling and marketing, professional fees and travel and business development which was partially offset by a $1.6 million favorable variance in bad debt expense and a $2.4 million increase in other fixed expenses, including a $0.8 million increase in professional fees.as compared to the three months ended June 30, 2021.
Nine Months Ended June 30, 20212022 Compared to Nine Months Ended June 30, 20202021
Operating revenues increased $78.4$104.8 million, or 24%26%, to $506.9 million in the nine months ended June 30, 2022 compared to $402.1 million in the nine months ended June 30, 2021 compared2021. Net operating revenues increased $101.6 million, or 31%, to $323.7$427.4 million in the nine months ended June 30, 2020. Net operating revenues increased $61.2 million, or 23%,2022 compared to $325.8 million in the nine months ended June 30, 2021 compared2021.
Operating revenues derived from listed derivatives increased $17.8 million, or 10%, to $264.6$187.6 million in the nine months ended June 30, 2020.
Operating revenues derived from OTC transactions increased customer activity$50.4 million, or 46%, to $159.3 million in the nine months ended June 30, 2022 compared to $108.9 million in the nine months ended June 30, 2021. This increase was driven by a 18% increase in OTC volumes as well as a 25% increase in the average rate per contract, as a result of strong performance in agricultural markets.and energy commodities as result of heightened volatility in global commodity markets as well as in interest rate products driven by higher short and medium term interest rates driven by inflationary concerns.
Operating revenues derived from physical transactionscontracts increased $23.5$23.0 million, or 32%24%, to $120.7 million in the nine months ended June 30, 2022 compared to $97.7 million in the nine months ended June 30, 2021, comparedprincipally due to $74.2a $12.9 million increase in agricultural and energy commodity operating revenues as well as a $10.0 million increase in precious metals operating revenues. Operating revenues during the nine months ended June 30, 2020, principally due to strong customer demand2022 were favorably impacted by realized gains of $2.6 million on the sale of physical inventories carried at the lower of cost or net realizable value, for precious metals as well as increased customer activitywhich losses on related derivative positions were recognized in agricultural and energy commodities. Theprior periods. Operating revenues during the nine months ended June 30, 2021 and 2020 includeincluded unrealized losses on derivative positions held against physical inventories carried at the lower of cost or net realizable value of $2.5 million, and $3.5 million, respectively.sold in subsequent quarters. In addition, in the nine months ended June 30, 2021 we recordedincluded a $1.9 million loss on the liquidation of certain physical inventories of crude oil and low sulfur fuel oil as a result of quality degradation and additional costs to sell.
Interest and fee income earned on client balances declined $2.9was $23.1 million or 23%, toand $9.7 million, respectively, in the nine months ended June 30, 2021 compared to $12.6 million in the nine months ended June 30, 2020 as2022 and 2021. This increase was driven by a result of a significant decline in short term interest rates related to FOMC actions to reduce the federal funds rate beginning in March 2020. Partially offsetting the decline in short term interest rates was an 62%32% increase in average client equity to $1,600 million.$2,104 million as well as an increase in short term interest rates.
Variable expenses, excluding interest, expressed as a percentage of operating revenues were 41%was 38% in both the nine months ended June 30, 2021 and 2020.2022 compared to 41% in the nine months ended June 30, 2021. The decline in variable expenses as a percentage of operating revenues was principally due to a change in product mix as well as the increase in interest/fees earned on client balances during the nine months ended June 30, 2022.
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Segment income increased $40.5$60.0 million, or 38%41%, to $208.1 million in the nine months ended June 30, 2022 compared to $148.1 million in the nine months ended June 30, 2021, compared to $107.6 million in the nine months ended June 30, 2020, principally driven by the growth in operating revenues, and a $0.9 million decline in bad debt expense, which was partially offset by a $1.1$16.7 million increase in fixed compensation and benefits as well asnon-variable direct expenses. The increase in non-variable direct expenses was principally driven by a $3.7$6.2 million increase in other fixed expenses.bad debt expense, a $2.0 million increase in professional fees and a $2.3 million increase in travel and business development.
Institutional
We provide institutional clients with a range of products and services, including a complete suite of equity trading services to help them find liquidity with best execution, consistent liquidity across a robust array of fixed income products, competitive and efficient clearing and execution in all major futures and securities exchanges globally as well as prime brokerage in equities and major foreign currency pairs and swap transactions. In addition, we originate, structure and place debt instruments in the international and domestic capital markets. These instruments include asset-backed securities (primarily in Argentina) and domestic municipal securities.
The tables below present the financial performance, a disaggregation of operating revenues, and select operating data and metrics used by management in evaluating the performance of the Institutional segment, for the periods indicated.
| Three Months Ended June 30, | Nine Months Ended June 30, | Three Months Ended June 30, | Nine Months Ended June 30, | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| (in millions) | (in millions) | 2021 | 2020 | % Change | 2021 | 2020 | % Change | (in millions) | 2022 | 2021 | % Change | 2022 | 2021 | % Change | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Revenues: | Revenues: | Revenues: | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Sales of physical commodities | Sales of physical commodities | $ | — | $ | — | n/m | $ | — | $ | — | n/m | Sales of physical commodities | $ | — | $ | — | —% | $ | — | $ | — | —% | ||||||||||||||||||||||||||||||||||||||||||||||||
| Principal gains, net | Principal gains, net | 82.5 | 93.3 | (12)% | 260.3 | 215.3 | 21% | Principal gains, net | 89.3 | 82.5 | 8% | 252.6 | 260.3 | (3)% | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Commission and clearing fees | Commission and clearing fees | 60.6 | 51.2 | 18% | 190.1 | 156.9 | 21% | Commission and clearing fees | 71.8 | 60.6 | 18% | 208.8 | 190.1 | 10% | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Consulting, management and account fees | Consulting, management and account fees | 4.3 | 4.5 | (4)% | 13.8 | 18.9 | (27)% | Consulting, management and account fees | 7.5 | 4.3 | 74% | 17.8 | 13.8 | 29% | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Interest income | Interest income | 25.6 | 20.8 | 23% | 65.9 | 96.8 | (32)% | Interest income | 40.5 | 25.6 | 58% | 94.0 | 65.9 | 43% | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total revenues | Total revenues | 173.0 | 169.8 | 2% | 530.1 | 487.9 | 9% | Total revenues | 209.1 | 173.0 | 21% | 573.2 | 530.1 | 8% | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Cost of sales of physical commodities | Cost of sales of physical commodities | — | — | n/m | — | — | n/m | Cost of sales of physical commodities | — | — | —% | — | — | —% | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Operating revenues | Operating revenues | 173.0 | 169.8 | 2% | 530.1 | 487.9 | 9% | Operating revenues | 209.1 | 173.0 | 21% | 573.2 | 530.1 | 8% | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Transaction-based clearing expenses | Transaction-based clearing expenses | 43.5 | 43.0 | 1% | 140.6 | 127.8 | 10% | Transaction-based clearing expenses | 51.1 | 43.5 | 17% | 152.6 | 140.6 | 9% | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Introducing broker commissions | Introducing broker commissions | 7.2 | 4.2 | 71% | 22.6 | 13.5 | 67% | Introducing broker commissions | 8.6 | 7.2 | 19% | 24.0 | 22.6 | 6% | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Interest expense | Interest expense | 11.2 | 9.5 | 18% | 26.7 | 63.8 | (58)% | Interest expense | 23.0 | 11.2 | 105% | 44.5 | 26.7 | 67% | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net operating revenues | Net operating revenues | 111.1 | 113.1 | (2)% | 340.2 | 282.8 | 20% | Net operating revenues | 126.4 | 111.1 | 14% | 352.1 | 340.2 | 3% | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Variable direct compensation and benefits | Variable direct compensation and benefits | 41.2 | 35.8 | 15% | 127.9 | 87.0 | 47% | Variable direct compensation and benefits | 51.7 | 41.2 | 25% | 137.7 | 127.9 | 8% | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net contribution | Net contribution | 69.9 | 77.3 | (10)% | 212.3 | 195.8 | 8% | Net contribution | 74.7 | 69.9 | 7% | 214.4 | 212.3 | 1% | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Fixed compensation and benefits | Fixed compensation and benefits | 10.5 | 12.6 | (17)% | 34.9 | 34.5 | 1% | Fixed compensation and benefits | 13.0 | 10.5 | 24% | 37.9 | 34.9 | 9% | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Other fixed expenses | Other fixed expenses | 12.5 | 8.5 | 47% | 33.6 | 28.1 | 20% | Other fixed expenses | 14.6 | 12.5 | 17% | 45.3 | 33.6 | 35% | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Bad debts | 0.4 | 2.4 | (83)% | 0.5 | 2.7 | (81)% | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Bad debt (recovery) expense, net | Bad debt (recovery) expense, net | (0.6) | 0.4 | n/m | 1.6 | 0.5 | 220% | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Non-variable direct expenses | Non-variable direct expenses | 23.4 | 23.5 | —% | 69.0 | 65.3 | 6% | Non-variable direct expenses | 27.0 | 23.4 | 15% | 84.8 | 69.0 | 23% | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Segment income | Segment income | $ | 46.5 | $ | 53.8 | (14)% | $ | 143.3 | $ | 130.5 | 10% | Segment income | $ | 47.7 | $ | 46.5 | 3% | $ | 129.6 | $ | 143.3 | (10)% | ||||||||||||||||||||||||||||||||||||||||||||||||
| Three Months Ended June 30, | Nine Months Ended June 30, | Three Months Ended June 30, | Nine Months Ended June 30, | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| (in millions) | (in millions) | 2021 | 2020 | % Change | 2021 | 2020 | % Change | (in millions) | 2022 | 2021 | % Change | 2022 | 2021 | % Change | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Operating revenues (in millions): | Operating revenues (in millions): | Operating revenues (in millions): | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Listed derivatives | Listed derivatives | $ | 41.2 | $ | 35.4 | 16% | $ | 128.1 | $ | 112.2 | 14% | Listed derivatives | $ | 49.2 | $ | 41.2 | 19% | $ | 142.1 | $ | 128.1 | 11% | ||||||||||||||||||||||||||||||||||||||||||||||||
| OTC derivatives | OTC derivatives | — | 0.1 | (100)% | 0.1 | 0.2 | (50)% | OTC derivatives | — | — | n/m | — | 0.1 | n/m | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Securities | Securities | 112.5 | 117.4 | (4)% | 350.0 | 296.4 | 18% | Securities | 131.1 | 112.5 | 17% | 353.9 | 350.0 | 1% | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| FX contracts | FX contracts | 3.7 | 4.8 | (23)% | 12.2 | 18.3 | (33)% | FX contracts | 7.9 | 3.7 | 114% | 22.1 | 12.2 | 81% | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Interest / fees earned on client balances | Interest / fees earned on client balances | 2.5 | 2.4 | 4% | 7.5 | 23.9 | (69)% | Interest / fees earned on client balances | 9.4 | 2.5 | 276% | 16.0 | 7.5 | 113% | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Other | Other | 13.1 | 9.7 | 35% | 32.2 | 36.9 | (13)% | Other | 11.5 | 13.1 | (12)% | 39.1 | 32.2 | 21% | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| $ | 173.0 | $ | 169.8 | 2% | $ | 530.1 | $ | 487.9 | 9% | $ | 209.1 | $ | 173.0 | 21% | $ | 573.2 | $ | 530.1 | 8% | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Select data (all $ amounts are U.S. dollar or U.S. dollar equivalents): | Select data (all $ amounts are U.S. dollar or U.S. dollar equivalents): | Select data (all $ amounts are U.S. dollar or U.S. dollar equivalents): | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Listed derivatives (contracts, 000’s) | Listed derivatives (contracts, 000’s) | 27,874 | 30,954 | (10)% | 86,212 | 96,807 | (11)% | Listed derivatives (contracts, 000’s) | 33,567 | 27,874 | 20% | 96,809 | 86,212 | 12% | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Listed derivatives, average rate per contract (1) | Listed derivatives, average rate per contract (1) | $ | 1.42 | $ | 1.11 | 28% | $ | 1.44 | $ | 1.12 | 29% | Listed derivatives, average rate per contract (1) | $ | 1.33 | $ | 1.42 | (6)% | $ | 1.38 | $ | 1.44 | (4)% | ||||||||||||||||||||||||||||||||||||||||||||||||
| Average client equity - listed derivatives (millions) | Average client equity - listed derivatives (millions) | $ | 2,188 | $ | 1,908 | 15% | $ | 2,135 | $ | 1,588 | 34% | Average client equity - listed derivatives (millions) | $ | 3,560 | $ | 2,188 | 63% | $ | 3,258 | $ | 2,135 | 53% | ||||||||||||||||||||||||||||||||||||||||||||||||
| Securities ADV (millions) | Securities ADV (millions) | $ | 2,901 | $ | 1,765 | 64% | $ | 2,687 | $ | 1,746 | 54% | Securities ADV (millions) | $ | 6,602 | $ | 2,901 | 128% | $ | 4,252 | $ | 2,687 | 58% | ||||||||||||||||||||||||||||||||||||||||||||||||
Securities RPM (2) | Securities RPM (2) | $ | 603 | $ | 1,040 | (42)% | $ | 681 | $ | 883 | (23)% | Securities RPM (2) | $ | 314 | $ | 603 | (48)% | $ | 434 | $ | 681 | (36)% | ||||||||||||||||||||||||||||||||||||||||||||||||
| Average money market / FDIC sweep client balances (millions) | Average money market / FDIC sweep client balances (millions) | $ | 1,611 | $ | 1,261 | 28% | $ | 1,431 | $ | 1,066 | 34% | Average money market / FDIC sweep client balances (millions) | $ | 1,863 | $ | 1,611 | 16% | $ | 1,730 | $ | 1,431 | 21% | ||||||||||||||||||||||||||||||||||||||||||||||||
| FX contracts ADV ( millions) | FX contracts ADV ( millions) | $ | 1,412 | $ | 897 | 57% | $ | 1,477 | $ | 1,354 | 9% | FX contracts ADV ( millions) | $ | 3,898 | $ | 1,412 | 176% | $ | 4,000 | $ | 1,477 | 171% | ||||||||||||||||||||||||||||||||||||||||||||||||
| FX contracts RPM | FX contracts RPM | $ | 40 | $ | 84 | (52)% | $ | 43 | $ | 73 | (41)% | FX contracts RPM | $ | 32 | $ | 40 | (20)% | $ | 28 | $ | 43 | (35)% | ||||||||||||||||||||||||||||||||||||||||||||||||
| (1) | Give-up fee revenues are excluded from the calculation of listed derivatives, average rate per contract. | |||||||||||||
| (2) | Interest income related to securities lending is excluded from the calculation of Securities RPM. | |||||||||||||
Three Months Ended June 30, 20212022 Compared to Three Months Ended June 30, 20202021
Operating revenues increased $3.2$36.1 million, or 2%21%, to $209.1 million in the three months ended June 30, 2022 compared to $173.0 million in the three months ended June 30, 2021 compared2021. Net operating revenues increased $15.3 million, or 14%, to $169.8$126.4 million in the three months ended June 30, 2020. Net operating revenues decreased $2.0 million, or 2%,2022 compared to $111.1 million in the three months ended June 30, 2021 compared2021.
Operating revenues derived from listed derivatives increased $8.0 million, or 19%, to $113.1$49.2 million in the three months ended June 30, 2020.
Operating revenues derived from securities transactions increased $18.6 million, or 17%, to $131.1 million in the three months ended June 30, 2020, principally driven by a 28% increase in the average rate per contract, which was partially offset by a 10% decline in listed derivative contract volumes. The decline in derivative contract volumes was primarily a result of heightened volatility in the prior year period related to the onset of the COVID-19 pandemic which in turn led to increased levels of customer activity in the year ago period.
Operating revenues derived from FX contracts increased $4.2 million, or 114%, to $7.9 million in the three months ended June 30, 2020.2022 compared to $3.7 million in the three months ended June 30, 2021, primarily driven by a 176% increase in the ADV of FX contracts traded principally driven by heightened volatility in global FX markets, partially offset by a 20% decline in the FX contract RPM.
Interest and fee income earned on client balances, which is associated with our listed derivative business, as well as our correspondent clearing and independent wealth management businesses increased $6.9 million, or 276%, principally driven by an increase in average client equity and average FDIC sweep client balances of 63% and 16%, respectively, as well as an increase in short-term interest rates.
Variable expenses, excluding interest, expressed as a percentage of operating revenues were 53% in the three months ended June 30, 2022 and the three months ended June 30, 2021.
Segment income increased $1.2 million, or 3%, to $47.7 million in the three months ended June 30, 2022 compared to $46.5 million in the three months ended June 30, 2021, as a result of the increase in net operating revenues noted above, which was partially offset by a $10.5 million increase in variable compensation, as well as a $3.6 million increase in non-variable direct expenses versus the three months ended June 30, 2021, including a $2.5 million increase in fixed compensation and benefits and a $1.2 million increase in trading systems and market information.
Nine Months Ended June 30, 2022 Compared to Nine Months Ended June 30, 2021
Operating revenues increased $43.1 million, or 8%, to $573.2 million in the nine months ended June 30, 2022 compared to $530.1 million in the nine months ended June 30, 2021. Net operating revenues increased $11.9 million, or 3%, to $352.1 million in the nine months ended June 30, 2022 compared to $340.2 million in the nine months ended June 30, 2021.
Operating revenues derived from listed derivatives increased $14.0 million, or 11%, to $142.1 million in the nine months ended June 30, 2022 compared to $128.1 million in the nine months ended June 30, 2021, principally driven by a 12% increase in listed derivative contract volumes which was partially offset by a 4% decline in the average rate per contract in the nine months ended June 30, 2022 compared to the nine months ended June 30, 2021.
Operating revenues derived from securities transactions increased $3.9 million, or 1%, to $353.9 million in the nine months ended June 30, 2022 compared to $350.0 million in the nine months ended June 30, 2021. The ADV of securities traded increased 64%58%, principally driven by increased customer activity in both fixed income and equity markets, however the RPM traded declined 42%36% in the threenine months ended June 30, 20212022, principally driven byresulting from lower spreads in fixed income products as compared to the threenine months ended June 30, 20202021, which benefited from wider spreads driven by the onsetCOVID-19 pandemic.
47
Operating revenues derived from FX contracts increased $9.9 million, or 81%, to $22.1 million in the nine months ended June 30, 2022 compared to $12.2 million in the nine months ended June 30, 2021, as a 171% increase in the ADV of FX contracts traded was partially offset by a 35% decline in the COVID-19 pandemic.average rate per contract.
Finally, interest and fee income earned on client balances, which is associated with our listed derivative business, as well as our correspondent clearing and independent wealth management businesses, increased $0.1$8.5 million, or 4%113%, principally driven by anto $16.0 million in the nine months ended June 30, 2022 compared to $7.5 million in the nine months ended June 30, 2021, as a result of a 53% increase in average client equity, anda 21% increase in average FDIC sweep client balances, of 15% and 28%, respectively. However the effect of these increasesan increase in client balances were mostly offset by significantly lower short termshort-term interest rates in the three months ended June 30, 2021 compared to the related to the three months ended June 30, 2020.rates.
Variable expenses, excluding interest, expressed as a percentage of operating revenues increased to 53%were 55% in both the threenine months ended June 30, 2021 compared to 49% in2022 and the threenine months ended June 30, 2020, primarily as the result of higher variable compensation.2021.
Segment income decreased $7.3$13.7 million, or 14%10%, to $46.5 million in the three months ended June 30, 2021 compared to $53.8 million in the three months ended June 30, 2020, primarily as a result of the decline in net operating revenues noted above and the increase in variable compensation as a percentage of operating revenues. Non-variable direct expenses, excluding bad debts, which declined $2.0 million, increased $1.9 million, or 9% versus the three months ended June 30, 2020, principally due to an increase in professional fees and depreciation expense related to internally developed software.
48
Retail
We provide our retail clients around the world access to over 15,00018,000 global financial markets, including spot foreign exchange ("forex"), both financial trading and physical investment in precious metals, as well as contracts for difference (“CFDs”), which are investment products with returns linked to the performance of underlying assets. In addition, our independent wealth management business offers a comprehensive product suite to retail investors in the U.S.
The tables below present the financial performance, a disaggregation of operating revenues, and select operating data and metrics used by management in evaluating the performance of the Retail segment, for the periods indicated.
| Three Months Ended June 30, | Nine Months Ended June 30, | Three Months Ended June 30, | Nine Months Ended June 30, | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| (in millions) | (in millions) | 2021 | 2020 | % Change | 2021 | 2020 | % Change | (in millions) | 2022 | 2021 | % Change | 2022 | 2021 | % Change | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Revenues: | Revenues: | Revenues: | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Sales of physical commodities | Sales of physical commodities | $ | 470.0 | $ | 60.0 | 683% | $ | 994.3 | $ | 209.3 | 375% | Sales of physical commodities | $ | 206.7 | $ | 470.0 | (56)% | $ | 662.2 | $ | 994.3 | (33)% | ||||||||||||||||||||||||||||||||||||||||||||||||
| Principal gains, net | Principal gains, net | 45.4 | — | n/m | 163.9 | 0.2 | n/m | Principal gains, net | 79.4 | 45.4 | 75% | 236.0 | 163.9 | 44% | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Commission and clearing fees | Commission and clearing fees | 14.7 | 11.4 | 29% | 44.4 | 37.0 | 20% | Commission and clearing fees | 12.1 | 14.7 | (18)% | 39.5 | 44.4 | (11)% | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Consulting, management and account fees | Consulting, management and account fees | 10.8 | 7.6 | 42% | 33.1 | 25.1 | 32% | Consulting, management and account fees | 12.9 | 10.8 | 19% | 38.5 | 33.1 | 16% | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Interest income | Interest income | 0.3 | 0.1 | 200% | 1.2 | 0.3 | 300% | Interest income | 1.0 | 0.3 | 233% | 1.8 | 1.2 | 50% | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total revenues | Total revenues | 541.2 | 79.1 | 584% | 1,236.9 | 271.9 | 355% | Total revenues | 312.1 | 541.2 | (42)% | 978.0 | 1,236.9 | (21)% | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Cost of sales of physical commodities | Cost of sales of physical commodities | 463.5 | 57.0 | 713% | 975.3 | 200.4 | 387% | Cost of sales of physical commodities | 203.6 | 463.5 | (56)% | 653.1 | 975.3 | (33)% | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Operating revenues | Operating revenues | 77.7 | 22.1 | 252% | 261.6 | 71.5 | 266% | Operating revenues | 108.5 | 77.7 | 40% | 324.9 | 261.6 | 24% | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Transaction-based clearing expenses | Transaction-based clearing expenses | 7.7 | 0.7 | 1,000% | 20.4 | 2.0 | 920% | Transaction-based clearing expenses | 6.6 | 7.7 | (14)% | 20.2 | 20.4 | (1)% | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Introducing broker commissions | Introducing broker commissions | 23.8 | 14.7 | 62% | 71.6 | 48.2 | 49% | Introducing broker commissions | 23.7 | 23.8 | —% | 73.8 | 71.6 | 3% | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Interest expense | Interest expense | 0.3 | — | n/m | 0.9 | — | n/m | Interest expense | 0.3 | 0.3 | —% | 1.4 | 0.9 | 56% | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net operating revenues | Net operating revenues | 45.9 | 6.7 | 585% | 168.7 | 21.3 | 692% | Net operating revenues | 77.9 | 45.9 | 70% | 229.5 | 168.7 | 36% | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Variable direct compensation and benefits | Variable direct compensation and benefits | 4.0 | 0.5 | 700% | 12.7 | 1.2 | 958% | Variable direct compensation and benefits | 6.2 | 4.0 | 55% | 17.1 | 12.7 | 35% | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net contribution | Net contribution | 41.9 | 6.2 | 576% | 156.0 | 20.1 | 676% | Net contribution | 71.7 | 41.9 | 71% | 212.4 | 156.0 | 36% | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Fixed compensation and benefits | Fixed compensation and benefits | 13.9 | 1.0 | 1,290% | 39.0 | 3.0 | 1,200% | Fixed compensation and benefits | 14.2 | 13.9 | 2% | 41.3 | 39.0 | 6% | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Other fixed expenses | Other fixed expenses | 22.3 | 1.4 | 1,493% | 60.5 | 3.4 | 1,679% | Other fixed expenses | 30.9 | 22.3 | 39% | 81.3 | 60.5 | 34% | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Bad debts | (0.3) | — | n/m | 0.6 | — | n/m | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Bad debt expense (recovery), net | Bad debt expense (recovery), net | 0.3 | (0.3) | n/m | 1.0 | 0.6 | 67% | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Non-variable direct expenses | Non-variable direct expenses | 35.9 | 2.4 | 1,396% | 100.1 | 6.4 | 1,464% | Non-variable direct expenses | 45.4 | 35.9 | 26% | 123.6 | 100.1 | 23% | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Other gain | Other gain | — | — | —% | 6.4 | — | n/m | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Segment income | Segment income | $ | 6.0 | $ | 3.8 | 58% | $ | 55.9 | $ | 13.7 | 308% | Segment income | $ | 26.3 | $ | 6.0 | 338% | $ | 95.2 | $ | 55.9 | 70% | ||||||||||||||||||||||||||||||||||||||||||||||||
| Three Months Ended June 30, | Nine Months Ended June 30, | ||||||||||||||||||||||||||||||||||
| (in millions) | 2021 | 2020 | % Change | 2021 | 2020 | % Change | |||||||||||||||||||||||||||||
| Operating revenues (in millions): | |||||||||||||||||||||||||||||||||||
| Securities | $ | 24.6 | $ | 18.8 | 31% | $ | 71.5 | $ | 61.1 | 17% | |||||||||||||||||||||||||
| FX / CFD contracts | 48.1 | — | n/m | 174.1 | — | n/m | |||||||||||||||||||||||||||||
| Physical contracts | 4.7 | 3.0 | 57% | 12.8 | 9.0 | 42% | |||||||||||||||||||||||||||||
| Interest / fees earned on client balances | 0.3 | 0.3 | —% | 0.9 | 1.4 | (36)% | |||||||||||||||||||||||||||||
| Other | — | — | —% | 2.3 | — | n/m | |||||||||||||||||||||||||||||
| $ | 77.7 | $ | 22.1 | 252% | $ | 261.6 | $ | 71.5 | 266% | ||||||||||||||||||||||||||
| Select data (all $ amounts are U.S. dollar or U.S. dollar equivalents): | |||||||||||||||||||||||||||||||||||
FX / CFD contracts ADV (millions) (1) | $ | 8,238 | $ | — | n/m | $ | 9,013 | $ | — | n/m | |||||||||||||||||||||||||
| FX / CFD contracts RPM | $ | 90 | $ | — | n/m | $ | 101 | $ | — | n/m | |||||||||||||||||||||||||
| Three Months Ended June 30, | Nine Months Ended June 30, | ||||||||||||||||||||||||||||||||||
| (in millions) | 2022 | 2021 | % Change | 2022 | 2021 | % Change | |||||||||||||||||||||||||||||
| Operating revenues (in millions): | |||||||||||||||||||||||||||||||||||
| Securities | $ | 23.5 | $ | 24.6 | (4)% | $ | 74.7 | $ | 71.5 | 4% | |||||||||||||||||||||||||
| FX / CFD contracts | 78.9 | 48.1 | 64% | 235.8 | 174.1 | 35% | |||||||||||||||||||||||||||||
| Physical contracts | 4.7 | 4.7 | —% | 11.7 | 12.8 | (9)% | |||||||||||||||||||||||||||||
| Interest / fees earned on client balances | 0.7 | 0.3 | 133% | 1.1 | 0.9 | 22% | |||||||||||||||||||||||||||||
| Other | 0.7 | — | n/m | 1.6 | 2.3 | (30)% | |||||||||||||||||||||||||||||
| $ | 108.5 | $ | 77.7 | 40% | $ | 324.9 | $ | 261.6 | 24% | ||||||||||||||||||||||||||
| Select data (all $ amounts are U.S. dollar or U.S. dollar equivalents): | |||||||||||||||||||||||||||||||||||
| FX / CFD contracts ADV (millions) | $ | 9,250 | $ | 8,238 | 12% | $ | 9,615 | $ | 9,013 | 7% | |||||||||||||||||||||||||
| FX / CFD contracts RPM | $ | 132 | $ | 90 | 47% | $ | 127 | $ | 101 | 26% | |||||||||||||||||||||||||
Three Months Ended June 30, 20212022 Compared to Three Months Ended June 30, 20202021
Operating revenues increased $55.6$30.8 million, or 252%40%, to $108.5 million in the three months ended June 30, 2022 compared to $77.7 million in the three months ended June 30, 2021 compared2021. Net operating revenues increased $32.0 million, or 70%, to $22.1$77.9 million in the three months ended June 30, 2020. Net operating revenues increased $39.2 million, or 585%,2022 compared to $45.9 million in the three months ended June 30, 2021 compared2021.
Operating revenues derived from FX/CFD contracts increased $30.8 million, or 64% to $6.7$78.9 million in the three months ended June 30, 2020.
49
Operating revenues derived from securities transactions relates to our independent wealth management activities which declined $1.1 million, or 4%, to $23.5 million in the acquisitionthree months ended June 30, 2022 compared to $24.6 million in the three months ended June 30, 2021.
Operating revenues derived from physical contracts were flat, at $4.7 million, in the three months ended June 30, 2022 compared to the three months ended June 30, 2021.
Variable expenses, excluding interest, as a percentage of Gain effective August 1, 2020.operating revenues were 34% in the three months ended June 30, 2022 compared to 46% in the three months ended June 30, 2021, with the decrease in the variable rate percentage resulting from product mix.
Segment income increased $20.3 million, or 338%, to $26.3 million in the three months ended June 30, 2022 compared to $6.0 million in the three months ended June 30, 2021, primarily as a result of the increase in net operating revenues noted above, which was partially offset by a $9.5 million increase in non-variable direct expenses compared to the three months ended June 30, 2021. The increase in non-variable direct expenses was principally due to a $5.0 million increase in selling and marketing expenses, a $0.6 million increase in trade systems and market information, a $0.7 million increase in professional fees, and a $1.3 million increase in depreciation and amortization.
Nine Months Ended June 30, 2022 Compared to Nine Months Ended June 30, 2021
Operating revenues increased $63.3 million, or 24%, to $324.9 million in the nine months ended June 30, 2022 compared to $261.6 million in the nine months ended June 30, 2021. Net operating revenues increased $60.8 million, or 36%, to $229.5 million in the nine months ended June 30, 2022 compared to $168.7 million in the nine months ended June 30, 2021.
Operating revenues derived from FX / CFD contracts increased $61.7 million, or 35% to $235.8 million, primarily as a result of a 26% increase in RPM and a 7% increase in FX/CFD contracts ADV compared to the nine months ended June 30, 2021.
Operating revenues derived from securities transactions relates to our independent wealth management activities which increased $5.8$3.2 million, or 31%4%, to $24.6$74.7 million in the threenine months ended June 30, 20212022 compared to $18.8$71.5 million in the threenine months ended June 30, 2020.2021.
Operating revenues derived from physical contracts increased $1.7declined $1.1 million, or 57%9%, to $4.7$11.7 million in the threenine months ended June 30, 2022 compared to $12.8 million in the nine months ended June 30, 2021, compared to $3.0 million inwith the three months ended June 30, 2020 principally driven by continuedcomparative prior year period reflecting a strong customer demand for precious metals.
Variable expenses, excluding interest, as a percentage of operating revenues were 46%34% in the threenine months ended June 30, 20212022 compared to 72%40% in the threenine months ended June 30, 2020,2021, with the decrease in the variable rate percentage being driven by the recent Gain acquisition that brings a large lower variable expense cost base.resulting from product mix.
Segment income increased $2.2$39.3 million, or 58%,70% to $6.0$95.2 million in the threenine months ended June 30, 2022 compared to $55.9 million in the nine months ended June 30, 2021, compared to $3.8 million in the three months ended June 30, 2020, primarily as a result of the increase in net operating revenues noted above.above, as well as a $6.4 million foreign exchange antitrust class action settlement received in the three months ended March 31, 2022 in our Retail forex business. Non-variable direct expenses increased $23.5 million, or 23% compared to the nine months ended June 30, 2021. The increase in non-variable direct expenses, was primarily a result of incremental costs from the acquisition of Gain effective August 1, 2020, which brings a larger fixed cost base.
Global Payments
We provide customized foreign exchange and treasury services to banks and commercial businesses, charities, non-governmental organizations, as well as charities and non-governmental and government organizations. We provide transparent pricing and offer payments services in more than 170185 countries and 140 currencies, which we believe is more than any other payments solutions provider.
The tables below present the financial performance, a disaggregation of operating revenues, and select operating data and metrics used by management in evaluating the performance of the Global Payments segment for the periods indicated.
| Three Months Ended June 30, | Nine Months Ended June 30, | Three Months Ended June 30, | Nine Months Ended June 30, | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| (in millions) | (in millions) | 2021 | 2020 | % Change | 2021 | 2020 | % Change | (in millions) | 2022 | 2021 | % Change | 2022 | 2021 | % Change | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Revenues: | Revenues: | Revenues: | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Sales of physical commodities | Sales of physical commodities | $ | — | $ | — | — | $ | — | $ | — | — | Sales of physical commodities | $ | — | $ | — | —% | $ | — | $ | — | —% | ||||||||||||||||||||||||||||||||||||||||||||||||
| Principal gains, net | Principal gains, net | 32.7 | 25.9 | 26% | 96.9 | 83.4 | 16% | Principal gains, net | 42.1 | 32.7 | 29% | 121.0 | 96.9 | 25% | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Commission and clearing fees | Commission and clearing fees | 1.3 | 0.9 | 44% | 3.8 | 2.9 | 31% | Commission and clearing fees | 1.5 | 1.3 | 15% | 4.6 | 3.8 | 21% | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Consulting, management, account fees | Consulting, management, account fees | 1.0 | 0.6 | 67% | 2.2 | 1.9 | 16% | Consulting, management, account fees | 0.7 | 1.0 | (30)% | 2.1 | 2.2 | (5)% | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Interest income | Interest income | — | — | — | — | — | — | Interest income | — | — | —% | — | — | —% | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total revenues | Total revenues | 35.0 | 27.4 | 28% | 102.9 | 88.2 | 17% | Total revenues | 44.3 | 35.0 | 27% | 127.7 | 102.9 | 24% | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Cost of sales of physical commodities | Cost of sales of physical commodities | — | — | — | — | — | — | Cost of sales of physical commodities | — | — | —% | — | — | —% | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Operating revenues | Operating revenues | 35.0 | 27.4 | 28% | 102.9 | 88.2 | 17% | Operating revenues | 44.3 | 35.0 | 27% | 127.7 | 102.9 | 24% | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Transaction-based clearing expenses | Transaction-based clearing expenses | 1.8 | 1.2 | 50% | 4.9 | 3.9 | 26% | Transaction-based clearing expenses | 2.4 | 1.8 | 33% | 6.1 | 4.9 | 24% | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Introducing broker commissions | Introducing broker commissions | 0.1 | 0.1 | —% | 0.4 | 0.4 | —% | Introducing broker commissions | 0.5 | 0.1 | 400% | 0.9 | 0.4 | 125% | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Interest expense | Interest expense | — | 0.1 | (100)% | 0.1 | 0.1 | —% | Interest expense | — | — | —% | 0.1 | 0.1 | —% | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net operating revenues | Net operating revenues | 33.1 | 26.0 | 27% | 97.5 | 83.8 | 16% | Net operating revenues | 41.4 | 33.1 | 25% | 120.6 | 97.5 | 24% | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Variable compensation and benefits | Variable compensation and benefits | 6.6 | 5.1 | 29% | 19.2 | 16.5 | 16% | Variable compensation and benefits | 7.8 | 6.6 | 18% | 23.0 | 19.2 | 20% | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net contribution | Net contribution | 26.5 | 20.9 | 27% | 78.3 | 67.3 | 16% | Net contribution | 33.6 | 26.5 | 27% | 97.6 | 78.3 | 25% | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Fixed compensation and benefits | Fixed compensation and benefits | 3.6 | 3.1 | 16% | 10.7 | 8.7 | 23% | Fixed compensation and benefits | 4.8 | 3.6 | 33% | 13.7 | 10.7 | 28% | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Other fixed expenses | Other fixed expenses | 2.6 | 1.9 | 37% | 7.5 | 6.6 | 14% | Other fixed expenses | 4.2 | 2.6 | 62% | 10.9 | 7.5 | 45% | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Bad debts | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Bad debt expense | Bad debt expense | — | — | —% | — | — | —% | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total non-variable direct expenses | Total non-variable direct expenses | 6.2 | 5.0 | 24% | 18.2 | 15.3 | 19% | Total non-variable direct expenses | 9.0 | 6.2 | 45% | 24.6 | 18.2 | 35% | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Segment income | Segment income | $ | 20.3 | $ | 15.9 | 28% | $ | 60.1 | $ | 52.0 | 16% | Segment income | $ | 24.6 | $ | 20.3 | 21% | $ | 73.0 | $ | 60.1 | 21% | ||||||||||||||||||||||||||||||||||||||||||||||||
| Three Months Ended June 30, | Nine Months Ended June 30, | Three Months Ended June 30, | Nine Months Ended June 30, | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| (in millions) | (in millions) | 2021 | 2020 | % Change | 2021 | 2020 | % Change | (in millions) | 2022 | 2021 | % Change | 2022 | 2021 | % Change | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Operating revenues (in millions): | Operating revenues (in millions): | Operating revenues (in millions): | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Payments | Payments | $ | 34.1 | $ | 26.8 | 27% | $ | 100.5 | $ | 86.2 | 17% | Payments | $ | 42.8 | $ | 34.1 | 26% | $ | 124.2 | $ | 100.5 | 24% | ||||||||||||||||||||||||||||||||||||||||||||||||
| Other | Other | 0.9 | 0.6 | 50% | 2.4 | 2.0 | 20% | Other | 1.5 | 0.9 | 67% | 3.5 | 2.4 | 46% | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| $ | 35.0 | $ | 27.4 | 28% | $ | 102.9 | $ | 88.2 | 17% | $ | 44.3 | $ | 35.0 | 27% | $ | 127.7 | $ | 102.9 | 24% | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Select data (all $ amounts are U.S. dollar or U.S. dollar equivalents): | Select data (all $ amounts are U.S. dollar or U.S. dollar equivalents): | Select data (all $ amounts are U.S. dollar or U.S. dollar equivalents): | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Global Payments ADV (millions) | Global Payments ADV (millions) | $ | 55 | $ | 40 | 38% | $ | 53 | $ | 46 | 15% | Global Payments ADV (millions) | $ | 66 | $ | 55 | 20% | $ | 61 | $ | 53 | 15% | ||||||||||||||||||||||||||||||||||||||||||||||||
| Global Payments RPM | Global Payments RPM | $ | 9,786 | $ | 10,650 | (8)% | $ | 10,041 | $ | 9,957 | 1% | Global Payments RPM | $ | 10,652 | $ | 9,786 | 9% | $ | 10,952 | $ | 10,041 | 9% | ||||||||||||||||||||||||||||||||||||||||||||||||
Three Months Ended June 30, 20212022 Compared to Three Months Ended June 30, 20202021
Operating revenues increased $7.6$9.3 million, or 28%27%, to $44.3 million in the three months ended June 30, 2022 compared to $35.0 million in the three months ended June 30, 2021 compared2021. Net operating revenues increased $8.3 million, or 25%, to $27.4$41.4 million in the three months ended June 30, 2020. Net operating revenues increased $7.1 million, or 27%,2022 compared to $33.1 million in the three months ended June 30, 2021 compared to $26.0 million in the three months ended June 30, 2020.2021.
The increase in operating revenues was principally driven bydue to a 38%20% increase in the average daily notional payment volume which was partially offset by an 8% declineas well as a 9% increase in the rate per million dollarsRPM traded. The increase in payment volume was principally due to an increase in activity from financial institutions.
Variable expenses, excluding interest, expressed as a percentage of operating revenues were 24% in the three months ended June 30, 2021 compared2022 and 2021.
Segment income increased $4.3 million, or 21%, to 23%$24.6 million in the three months ended June 30, 2020.
Nine Months Ended June 30, 20212022 Compared to Nine Months Ended June 30, 20202021
Operating revenues increased $14.7$24.8 million, or 17%24%, to $127.7 million in the nine months ended June 30, 2022 compared to $102.9 million in the nine months ended June 30, 2021 compared2021. Net operating revenues increased $23.1 million, or 24% to $88.2$120.6 million in the nine months ended June 30, 2020. Net operating revenues increased $13.7 million, or 16%2022 compared to $97.5 million in the nine months ended June 30, 2021 compared to $83.8 million in the nine months ended June 30, 2020.2021.
The increase in operating revenues was primarily driven byprincipally due to a 15% increase in the average daily notional payment volume andas well as a 1%9% increase in the rate per million dollars traded.transacted.
Variable expenses, excluding interest, expressed as a percentage of operating revenues were 24%23% in both the nine months ended June 30, 2021 and2022 compared to 24% in the nine months ended June 30, 2020.2021.
Segment income increased $8.1$12.9 million, or 16%21%, to $73.0 million in the nine months ended June 30, 2022 compared to $60.1 million in the nine months ended June 30, 2021 compared to $52.0 million in the nine months ended June 30, 2020.2021. This increase primarily resulted fromwas principally due to the increase in net operating revenues, partially offset by a $2.9$6.4 million increase in non-variable direct expenses versus the prior year period.period, which includes a $3.0 million increase in fixed compensation and benefits.
Unallocated Costs and Expenses
The following table provides information regarding our unallocated costs and expenses. These 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, which are not included in the results of the operating segments above.
| Three Months Ended June 30, | Nine Months Ended June 30, | Three Months Ended June 30, | Nine Months Ended June 30, | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| (in millions) | (in millions) | 2021 | 2020 | % Change | 2021 | 2020 | % Change | (in millions) | 2022 | 2021 | % Change | 2022 | 2021 | % Change | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Compensation and benefits: | Compensation and benefits: | Compensation and benefits: | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Variable compensation and benefits | Variable compensation and benefits | $ | 11.6 | $ | 8.9 | 30 | % | $ | 29.7 | $ | 25.2 | 18 | % | Variable compensation and benefits | $ | 16.7 | $ | 11.6 | 44% | $ | 41.6 | $ | 29.7 | 40% | ||||||||||||||||||||||||||||||||||||||||||||||
| Fixed compensation and benefits | Fixed compensation and benefits | 29.1 | 20.6 | 41 | % | 86.4 | 62.3 | 39 | % | Fixed compensation and benefits | 27.7 | 29.1 | (5)% | 89.0 | 86.4 | 3% | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 40.7 | 29.5 | 38 | % | 116.1 | 87.5 | 33 | % | 44.4 | 40.7 | 9% | 130.6 | 116.1 | 12% | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Other expenses: | Other expenses: | Other expenses: | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Occupancy and equipment rental | Occupancy and equipment rental | 9.2 | 5.3 | 74 | % | 25.0 | 15.2 | 64 | % | Occupancy and equipment rental | 9.0 | 9.2 | (2)% | 26.3 | 25.0 | 5% | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Non-trading technology and support | Non-trading technology and support | 6.2 | 5.3 | 17 | % | 22.0 | 14.7 | 50 | % | Non-trading technology and support | 9.2 | 6.2 | 48% | 28.3 | 22.0 | 29% | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Professional fees | Professional fees | 4.9 | 5.3 | (8) | % | 15.8 | 13.2 | 20 | % | Professional fees | 6.7 | 4.9 | 37% | 19.5 | 15.8 | 23% | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Depreciation and amortization | Depreciation and amortization | 4.7 | 4.1 | 15 | % | 13.1 | 11.8 | 11 | % | Depreciation and amortization | 5.7 | 4.7 | 21% | 16.3 | 13.1 | 24% | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Communications | Communications | 1.5 | 1.5 | — | % | 4.8 | 4.2 | 14 | % | Communications | 1.3 | 1.5 | (13)% | 4.1 | 4.8 | (15)% | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Selling and marketing | Selling and marketing | 0.4 | 0.4 | — | % | 1.0 | 3.8 | (74) | % | Selling and marketing | 2.0 | 0.4 | 400% | 4.9 | 1.0 | 390% | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Trading systems and market information | Trading systems and market information | 0.9 | 0.9 | — | % | 2.5 | 2.1 | 19 | % | Trading systems and market information | 1.1 | 0.9 | 22% | 3.6 | 2.5 | 44% | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Travel and business development | Travel and business development | 0.5 | 0.2 | 150 | % | 1.2 | 2.2 | (45) | % | Travel and business development | 1.1 | 0.5 | 120% | 2.3 | 1.2 | 92% | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Other | Other | 4.7 | 4.7 | — | % | 16.4 | 11.7 | 40 | % | Other | 6.2 | 4.7 | 32% | 17.8 | 16.4 | 9% | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 33.0 | 27.7 | 19 | % | 101.8 | 78.9 | 29 | % | 42.3 | 33.0 | 28% | 123.1 | 101.8 | 21% | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total compensation and other expenses | Total compensation and other expenses | $ | 73.7 | $ | 57.2 | 29 | % | $ | 217.9 | $ | 166.4 | 31 | % | Total compensation and other expenses | $ | 86.7 | $ | 73.7 | 18% | $ | 253.7 | $ | 217.9 | 16% | ||||||||||||||||||||||||||||||||||||||||||||||
Three Months Ended June 30, 20212022 Compared to Three Months Ended June 30, 20202021
Total unallocated costs and other expenses increased $16.5$13.0 million, or 18%, to $86.7 million in the three months ended June 30, 2022 compared to $73.7 million in the three months ended June 30, 2021 compared2021. Compensation and benefits increased $3.7 million, or 9%, to $57.2$44.4 million in the three months ended June 30, 2020. Compensation and benefits increased $11.2 million, or 38%,2022 compared to $40.7 million in the three months ended June 30, 2021, principally due to an increase in variable compensation due to improved performance as well as an increase in headcount.
Average administrative headcount increased 12% in the three months ended June 30, 2022 compared to $29.5the three months ended June 30, 2021, principally within IT development, compliance, and human resources. Other non-compensation expenses increased $9.3 million, or 28%, to $42.3 million in the three months ended June 30, 2020, principally due to the Gain acquisition in the fourth quarter of fiscal 2020. Fixed compensation and benefits during the three months ended June 30, 2021 include severance costs of $3.2 million, principally due to the departure of an executive officer. During the three months ended June 30, 2020, severance costs were $0.7 million.
Nine Months Ended June 30, 20212022 Compared to Nine Months Ended June 30, 20202021
Total unallocated costs and other expenses increased $51.5$35.8 million, or 16%, to $253.7 million in the nine months ended June 30, 2022 compared to $217.9 million in the nine months ended June 30, 2021 compared2021. Compensation and benefits increased $14.5 million, or 12%, to $166.4$130.6 million in the nine months ended June 30, 2020. Compensation and benefits increased $28.6 million, or 33%2022 compared to $116.1 million in the nine months ended June 30, 2021 compared to $87.5 million in the nine months ended June 30, 2020, principally due to the Gain acquisition in the fourth quarter of fiscal 2020. Other non-compensation expenses increased $22.9 million, or 29%, to $101.8 million in the nine months ended June 30, 2021 compared to $78.9 million in the nine months ended June 30, 2020 principally due to the Gain acquisition in the fourth quarter of fiscal 2020. Fixed compensation and benefits during the nine months ended June 30, 2021 include severance costs of $6.1 million, principally due to the departure of certain senior officers. 2021.
During the nine months ended June 30, 2020, severance2022, the increase in compensation and benefits was principally due to an increase in variable compensation due to improved performance as well as an increase in headcount. During the nine months ended June 30, 2022, the increase in selling and marketing expenses is principally due to the costs were $1.2 million.of holding our bi-annual global sales and strategy meeting in March 2022.
Liquidity, Financial Condition and Capital Resources
Overview
Liquidity is defined as our ability to generate sufficient amounts of cashfunding to meet all of our cash needs. Liquidity is of critical importance to us and imperative to maintaining our operations on a daily basis. Our seniorSenior management establishes liquidity and capital policies, andwhich we monitor liquidity on a daily basis. Senior management reviews business performance relative to these policiesbasis and monitors the availability of ourreview for funding from both internal and external sources of financing.sources. We continuously evaluate how effectively our policies support our business operations. We have historically financed our liquidity and capital needs primarily with funds generated from our subsidiaries' operations, issuing debt and equity securities, and access to committed credit facilities. We plan to finance our future operating liquidity and regulatory capital needs in a manner consistent with our past practice. Liquidity and capital matters are reported regularly to our board of directors.
StoneX Financial Inc. (“Stonex Financial”) is registered as a broker-dealer with the Securities and Exchange Commission (“SEC”) and is a member of both the Financial Industry Regulatory Authority (“FINRA”) and the Municipal Securities Rulemaking Board (“MSRB”). In addition, StoneX Financial Inc. 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. StoneX Financial Inc. has a responsibility to meet margin calls at all exchanges on a daily basis, and on an intra-day basis, if deemed necessary by relevant regulators or exchanges. We require our clients to make margin deposits the next business day, and we require our largest 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 theour clients’ net open positions of our clients and the required margin per contract. StoneX Financial Inc. 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. StoneX Financial Inc. is also subject to the Rule 15c3-3 of the Securities Exchange Act of 1934, as amended (“Customer Protection Rule”).
Gain Capital Group, LLC is registered as both a futures commission merchant and registered foreign exchange dealer, 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 NFA Financial Requirements, Sections 1 and 11.
These rules specify the minimum amount of capital that must be available to support our clients’ account balances and open trading positions, including the amount of assets that both StoneX Financial Inc. and Gain Capital Group, LLC must maintain in relatively liquid form, and are designed toform. Further, the rules measure general financial integrity and liquidity.
StoneX Financial Ltd (formerly INTL FCStone Ltd) is regulated by the Financial Conduct Authority (“FCA”), the regulator of the financial services industry in the U.K. and is subject to regulations which impose regulatory capital requirements. StoneX Financial Ltd is a member of various commodities and futures exchanges in the U.K. and Europe and has the responsibility to meet margin calls at all exchanges on a daily basis and intra-day basis, ifas necessary. StoneX Financial Ltd is required to be compliant with the U.K.’s Individual Liquidity Adequacy Standards (“ILAS”).‘MIFIDPRU’ regulation. To comply with these standards, we have implemented daily liquidity procedures, conduct periodic reviews of liquidity by stressed scenarios, and have createdare required to maintain enough liquidity buffers. Duringfor the nine months ended June 30, 2021, StoneX Financial Ltd finalizedfirm to survive for one year under the transfer of substantially all business formerly within Gain’s U.K. operating entity, Gain Capital U.K., Ltd.appropriate stressed conditions.
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 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, 2021,2022, we had total equity of $901.4$1,047.3 million, outstanding loans under revolving credit facilities and other loans of $240.0 million, outstanding senior secured term loan of $172.5$508.2 million, and $336.2$338.9 million outstanding on our senior secured notes, net of deferred financing costs. As of June 30, 2022, we had no amounts outstanding under our senior secured term loan.
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A substantial portion of our assets are liquid. As of June 30, 2021,2022, approximately 97% 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; client receivables, marketable financial instruments and investments, and physical commodities inventory. All assets that are not 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.
Client and Counterparty Credit and Liquidity Risk
Our operations expose us to credit risk, of default ofwhich is the risk that our clients and counterparties. Theor counterparties default. This risk includes liquidity risk to the extent our clients or counterparties are unable to make timely margin payment of margin or other credit support. These risks expose us indirectly to the financing and liquidity risks of our clients and counterparties, including the risks that our clients and counterparties may not be able to finance their operations.
As a clearing broker, we act on behalf of our 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 clients. Accordingly, we are responsible for our clients’ obligations with respect to these transactions, which exposes us to significant credit risk. Our clients are required to make any required margin deposits the next business day, and we require our largest clients to make intra-day margin payments during periods of significant price movement. Our clients are required tomust maintain initial margin requirements at the levellevels set by the respective exchanges, but we have the ability to increase the margin requirements for clients based on their open positions, trading activity, or market conditions.
With respect to OTC derivative transactions, we act as a principal, which exposes us to the credit risk of both our clients and the counterparties with which we offset our client positions. As with exchange-traded transactions, our OTC transactions require that we meet initial and variation margin payments on behalf of our clients before we receive the required payment from our clients. OTC clients are required to post sufficient collateral to meet margin requirements based on value-at-risk models, as well as variation margin requirements based on the price movement of the commodity or security in which they transact. Our clients are required tomust make any required margin deposits the next business day, and we may require our largest clients to make intra-day margin payments during periods of significant price movement. We have the ability to increase the margin requirements for clients based on their open positions, trading activity, or market conditions. On a limited basis, we provide credit thresholds to certain clients, based on internal evaluations and monitoring of client creditworthiness.
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 assessed daily and we may require counterparties to deposit additional collateral or return collateral pledged, when appropriate.
Commodities Inventory
In the ordinary course of business, we holds commodities inventory in third-party licensed grain facilities. As of March 31, 2022, we held title, in the form of warehouse receipts, to approximately 2.8 million bushels of soybeans, in multiple facilities owned by one third-party operator. On September 29, 2021, the above-mentioned third-party operator filed a petition for Chapter 11 bankruptcy, and a Chief Restructuring Officer (“CRO”) was assigned by the court to assist in administering the allocation of the grain on hand and proceeds from the sale of processed soybean products.
On May 2, 2022, the Bankruptcy court approved a settlement agreement entered into by our subsidiary StoneX Commodity Solutions, LLC, certain banks, farmer groups and other parties to provide for the distribution of bankruptcy proceeds and assets. On May 27, 2022, StoneX Commodity Solutions LLC received $30.4 million from the final disposition of the proceeds of grain. The amount received through the bankruptcy proceedings was insufficient to cover the asset value of the soybean bushels, and we continue to evaluate our insurance coverage under applicable policies in-force, to cover the shortfall, and discussions with our insurance carriers are ongoing. As of June 30, 2022, receivables from clients, net, in the condensed consolidated balance sheet includes $1.2 million, net of an allowance of $3.0 million, relating to the shortfall in the proceeds we received in connection with the Bankruptcy court approved settlement agreement. There can be no assurance as to our ability to recover any amounts, relating to the shortfall in proceeds received, through insurance coverage.
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OptionSellers
In November 2018, balances in approximately 300 accounts of the futures commission merchant (“FCM”) division of our wholly owned subsidiary, StoneX Financial Inc. (“StoneX Financial”), 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 StoneX Financial’sFinancial Inc.’s client agreements and obligations under market regulation standards. 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 StoneX Financial Inc. acted solely as the clearing firm in its role as the FCM.
StoneX Financial’sFinancial Inc.’s client agreements hold account holdersowners liable for all losses in their accounts and obligate the account holders to reimburse StoneX Financial Inc. for any deficits in their accounts. As of June 30, 2021,2022, the aggregate receivable from these client accounts, net of collections and other allowable deductions,Net Client Accounts Receivable was $28.9$27.4 million, with no individual account receivable exceeding $1.4 million. As of June 30, 2022, StoneX Financial 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.
Additionally, StoneX Financial Inc. has 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 have, and will continue to, defend them vigorously. The ultimate outcome of these arbitrations cannot presently be determined; however, we believe the likelihood of a material adverse outcome is remote.
During July 2022, the Company prevailed in an arbitration proceeding involving accountholders that were clients of OptionSellers. The arbitration panel denied the claims against the Company for trading losses incurred by those accountholders and also ordered those accountholders to pay their outstanding deficit balances to the Company. This arbitration victory followed a similar outcome in a separate arbitration decision issued in January 2022, in which the arbitration panel also denied the claims against the Company for trading losses incurred by the shareholders and ordered the accountholders to pay their outstanding deficits to the Company. During the three months ended June 30, 2022, the Company also entered into settlements with certain other accountholders whereby certain of these accountholders agreed to pay their outstanding deficit balances (none of which settlements involved the Company making any payments in respect of trading losses). There can be no assurance as to the outcome of future arbitrations or the Company’s ability to collect on successful court-awarded client receivables.
Depending on future collections and arbitration proceedings, any provisions for bad debts and actual losses ultimately may or may not be material to our financial results. Currently, we do not believe that any potential losses related to this matter would impact our ability to comply with our ongoing liquidity, capital, and regulatory requirements.
Primary Sources and Uses of Cash
Our cash and cash equivalents and customer cash and securities held for customers are held at banks, deposits at liquidity providers, investments in money market funds that invest in highly liquid investment grade securities, includingand U.S. treasury bills, as well as investments in U.S treasury bills. In general, we believe all of our investments and deposits are of high credit quality and we have more than adequate liquidity to conduct our businesses.
Our assets and liabilities may vary significantly from period to period due to changing client requirements, economic and market conditions, and our growth. Our total assets as of June 30, 20212022 and September 30, 2020,2021, were $16.8$19.4 billion and $13.5$18.8 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 client activity, commodities prices, and changes in the balances of financial instruments and commodities inventory. StoneX Financial Inc. and StoneX Financial Ltd occasionally utilize their margin line credit facilities, on a short-term basis, to meet intraday settlements with commodity exchanges prior to collecting margin funds from clients.
The majority of the assets of StoneX Financial Inc., StoneX Financial Ltd, and Gain Capital Group, LLC, and StoneX Markets LLC are restricted from being transferred to the parent or other affiliates due to specific regulatory requirements. This restriction has noThese restrictions do not significantly impact on our ability to meet our cash obligations, and no such impactthat is not expected to change 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 majority of our excess funds are held with high-quality institutions, under highly liquidhighly-liquid reverse repurchase agreements, U.S. government obligations, interest earning cash deposits and AA-ratedhighly-rated money market investments.
We do not intend to distribute earnings of our foreign subsidiaries in a taxable manner, and therefore intend to limit distributions to earnings previously taxed in the U.S., or earnings that would qualify for the 100 percent dividends received
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deduction, and earnings that would not result in any significant foreign taxes. We repatriatedrepatriated $17.3 million and $300.6 million and $30.0 million for the nine months ended June 30, 20212022 and 2020,2021, respectively, of earnings previously taxed in the U.S., resulting in no significant incremental taxes. Therefore, the Company has not recognized a deferred tax liability on its investment in foreign subsidiaries.
Senior Secured Notes
The Notes will mature on June 15, 2025. Interest on the Notes accrues at a rate of 8.625% per annum and is payable semiannually in arrears on June 15 and December 15 of each year, commencing on December 15, 2020. We incurred debt issuance costs of $9.5 million in connection with the issuance of the Notes, which are being amortized over the term of the Notes under the effective interest method.
We have thedid not exercise our option to redeem all or a portion of the Notes at any time prior to June 15, 2022 at a price equal to 100% of the principal amount of the Notes redeemed plus accrued and unpaid interest to the redemption date plus a “make-whole” premium. At any time on or after June 15, 2022, we may redeem the Notes, in whole or in part, at the redemption prices set forth in the indenture. At any time before June 15, 2022, we may also redeem up to 40% of the aggregate principal amount of the Notes at a redemption price of 108.625% of the principal amount, plus accrued and unpaid interest, if any, to the date of redemption, with the proceeds of certain equity offerings.
Committed Credit Facilities
As of June 30, 2021,the report date, we had four committed bank credit facilities, totaling $808.8$1,000.0 million, of which $412.5$442.0 million was outstanding.outstanding as of June 30, 2022. The credit facilities include:
•A three-year first-lien senior secured syndicated loan facility, which includes a $236.1 million revolving credit facility and a $196.5 million original value Term Loan, committed until August 22, 2022, under which we are currently entitledavailable to borrow up to $408.8 million, subject to certain terms and conditions of the credit agreement. This credit facility will continue to be used to finance the Company’sCompany for general working capital requirements and capital expenditures. The facility was amended on April 21, 2022 to replace the $236.0 million revolving credit facility is secured byand a first priority lien on substantially all of$165.0 million Term Loan A facility with a $475.0 million revolving credit facility and extend the assets ofmaturity date to April 21, 2025. Prior to the amendment, the Company and those of our subsidiaries that guarantee the credit facility. The Company iswas required to make quarterly principal payments against the Term Loan equal to 1.25% of the original balance withbalance. During the remaining balance due onnine months ended June 30, 2022, prior to its replacement, the maturity date. Amounts repaid onCompany made scheduled quarterly principal payments against the Term Loan may not be reborrowed.equal to $4.9 million.
•An unsecured syndicated loan facility committed until April 1, 2022,March 31, 2023, under which our subsidiary, StoneX Financial Inc. 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 loancommitted borrowing facility committed until January 29, 2022, under whichavailable to our wholly owned subsidiary, FCStone Merchant Services,StoneX Commodity Solutions LLC, is entitled to borrow up to $300.0 million, subject to certain terms and conditions of the credit agreement. The loan proceeds are used to finance commodity financing arrangements and commodity repurchase agreements. The facility was amended on July 28, 2022 to increase the amount available from $325.0 million to $400.0 million and extend the maturity date to July 28, 2024. The facility is secured by the assets of StoneX Commodity Solutions LLC and guaranteed by the Company.
•An unsecured syndicated loan facility committed until October 14, 2021,2022, under which our subsidiary, StoneX Financial 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.
Our facility agreements contain certain financial covenants relating to financial measures on a consolidated basis, as well as on a stand-alone basis for certain subsidiaries, 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, 2022, 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 June 30, 2022, interest expense directly attributable to trading activities includes $19.8 million in connection with trading activities conducted as an institutional dealer in fixed income securities, and $21.0 million in connection with securities lending activities.
Additional information regarding the committed bank credit facilities can be found in Note 9 of the Condensed Consolidated Financial Statements. As reflected above, threecertain of ourthe Company’s committed credit facilities are scheduled to expire during the next twelve months as offollowing the quarterly period ended June 30, 2021. We intend2022. The Company intends to renew or replace the other
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facilities as they expire, and based on ourthe Company’s liquidity position and capital structure, we believe westructure, the Company believes it will be able to do so.
Uncommitted Credit Facilities
As of June 30, 2021,the report date, we had four uncommitted bank credit facilities with a total outstanding balance of $25.0 million.$58.0 million as of June 30, 2022. The credit facilities include:
•A secured uncommitted loan facility under which StoneX Financial Inc. may borrow up to $75.0 million, collateralized by commodity warehouse receipts, to facilitate U.S. commodity exchange deliveries of its clients, subject to certain terms and conditions of the credit agreement.
•A secured uncommitted loan facility under which StoneX Financial Inc. may borrow up to $100.0 million for short term funding of firm and client margin requirements, subject to certain terms and conditions of the 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. As of June 30, 2022, there was no outstanding balance on this facility.
•A secured uncommitted loan facility under which StoneX Financial Inc. may borrow requested amounts for short term funding of firm and 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 are secured by first liens on firm owned marketable securities or client owned securities which have been pledged to us under a clearing arrangement. As of June 30, 2022, there was $13.0 million outstanding balance on this facility.
•A secured uncommitted loan facility under which StoneX Financial Ltd may borrow up to $25.0 million,funds, collateralized by commodities warehouse receipts, to facilitate the financing of inventory of commodities, subject to certain terms and conditions of the credit agreement. As of June 30, 2021,2022, there was $25.0$45.0 million outstanding on this facility.
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. Certain of our 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 regulatory capital requirements as of June 30, 2021.2022. Additional information on our subsidiaries subject to significant net capital and minimum net capital requirements can be found in Note 16 of the Condensed Consolidated Financial Statements.
The Dodd-Frank Act created a comprehensive new regulatory regime governing the OTC swaps and imposed further regulations on listed derivatives. The Dodd-Frank Act also created a registration regime for new categories of market participants, such as “swap dealers”, among others.
The Dodd-Frank Act generally introduced a framework for (i) swap data reporting and record keeping on counterparties and data repositories; (ii) centralized clearing for swaps, with limited exceptions for end-users; (iii) the requirement to execute swaps on regulated swap execution facilities; (iv) imposition on swap dealers to exchange margin on uncleared swaps with counterparties; and (v) the requirement to comply with new capital rules.
Swap dealers are subject to a comprehensive regulatory regime with new obligations for the swaps activities for which they are registered, including adherence to risk management policies, supervisory procedures, trade record and real time reporting requirements, as well as proposed rules for new minimum capital requirements.requirements which became effective October 6, 2021.
Our subsidiary, StoneX Markets LLC, and GAIN GTX, LLC have faced, and may continue to face, increased costs due to the registration and regulatory requirements listed above, as may any other of our subsidiaries that register asis a CFTC provisionally registered swap dealer, and/or swap execution facility. In particular, the CFTC has proposedand under these capital rules that would require a swap-dealeris subject to maintainprescribed minimum regulatory capital requirements. During 2016, CFTC 23.154, Calculation of at least $20.0 million. Initial Margin rules came into effect, imposing new requirements on registered swap dealers and certain counterparties to exchange initial margin, with phased-in compliance dates, with StoneX Markets LLC falling in the final compliance date tier of September 2022.
Compliance with this or other swap-related regulatory capital requirements may require us to devote more capital to these businesses or otherwise restructure our operations, such as by combining these businesses with other regulated subsidiaries that must also satisfy regulatory capital requirements. StoneX Markets LLC has faced, and may continue to face, increased costs due to the registration and regulatory requirements listed above, as may any other of our subsidiaries that may be required to register, or may register voluntarily, as a swap dealer and/or swap execution facility.
Cash Flows
We include client cash and securities segregated for regulatory purposes in our Condensed Consolidated Statements of Cash Flows. We hold a significant amount of U.S. Treasury obligations, which represent investments 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 Condensed Consolidated Statements of Cash Flows to the extent that they have an original or acquired maturity of 90 days or less and, therefore, meet the definition of a segregated 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 consolidated statements of cash flows if they have an original or acquired maturity of greater than 90 days. Typically, there is an offsetting use or source of cash related to the change in the payables to clients. However, we will report a use of cash in periods where segregated U.S. Treasury securities that meet the aforementioned definition of a segregated cash equivalent mature and are replaced with U.S. Treasury securities that have original or acquired maturities that are greater than 90 days.
Our cash, segregated cash, cash equivalents, and segregated cash equivalents increaseddecreased by $1,343.9$447.9 million from $4,468.4$6,509.5 million as of September 30, 20202021 to $5,812.3$6,061.6 million as of June 30, 2021.2022. During the nine months ended June 30, 2021,2022, net cash of $1,378.6$496.0 million was provided byused in operating activities, $50.8$37.6 million was used in investing activities and net cash of $0.6$91.2 million was used inprovided by financing activities.
Net cash used inprovided by financing activities during the nine months ended June 30, 20212022 included significant inflows from payables to lenders under 90 days of $269.6 million, including the newly agreed to revolver. These inflows were offset by the required principal payments and complete pay off of $7.4 million made during the period against the senior term loan. Ourloan totaling $170.3 million during the period. Further outflows related to repayments ofon our revolving line of credit with maturities greater than 90 days exceed our inflowsexceeding borrowings by $5.0$10.0 million. Additionally,Also, we made open market purchases of our common stock outstanding for $3.1 million. Offsetting these cash outflows, we had a $9.0 million inflow from notes payable issued to finance our airplane purchase and $7.6recorded $6.2 million in funds received for stock option exercises.
We continuously evaluate opportunities to expand our business. Investing activities include $53.5$37.6 million in capital expenditures for property and equipment during the nine months ended June 30, 20212022 compared to $5.5$53.5 million during the prior year. The fluctuation in capital expenditures is principally related to leasehold improvement projects related tofor new office space and purchasing IT equipment, and capitalizing internally developed software. In addition, we purchased a corporate airplane, which subsequently was partially financed with a promissory note with a banking institution. Duringour aircraft in the nine months ended June 30, 2021, we sold the corporate airplane we owned previously, resulting in a cash inflow of $3.1 million.prior year.
Fluctuations in exchange rates increaseddecreased our cash, segregated cash, cash equivalents and segregated cash equivalents by $16.7$5.5 million.
In the broker-dealer and related trading industries, companies report trading activities in the operating section of the statement of cash flows. Due to the daily price volatility in the commodities market, as well as changes in margin requirements, fluctuations in the balances of deposits held at various exchanges, marketable securities and 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. 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, within our unregulated OTC and foreign exchange operations, cash deposits received from clients are reflected as cash provided from operations. Subsequent transfers 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.
Unrealized gains and losses on open positions revalued at prevailing foreign currency exchange rates are included in trading revenue but have no direct impact on cash flow from operations. Similarly, gains and losses become realized when client transactions are liquidated, though they do not affect cash flow. To some extent, the amount of net deposits made by our clients in any given period is influenced by the impact of gains and losses on our client balances, such that clients may be required to post additional funds to maintain open positions or may choose to withdraw excess funds on open positions. Only the latter activities result in cash movements.
On December 16, 2020,August 25, 2021, our Board of Directors authorized the repurchase of up to 1.0 million shares of our outstanding common stock from time to time in open market purchases and private transactions, commencing on December 23, 2020October 1, 2021 and ending on September 30, 2021.2022. The repurchases are 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.
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 for the following year. Any projections of future earnings and cash flows are subject to substantial uncertainty, particularly in light of the rapidly changing market and economic conditions created by the COVID-19 pandemic.
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We may need to access debt and equity markets in the future if unforeseen costs or opportunities arise, to meet working capital requirements, fund acquisitions or investments or repay our indebtedness under credit facilities. If we need to obtain new debt or equity financing in the future, the terms and availability of such financing may be impacted by economic and financial market conditions, as well as our financial condition and results of operations at the time we seek additional financing. Although we believe that our financial resources will allow us to manage the anticipated impact of COVID-19 on our operations for the foreseeable future, the challenges posed by COVID-19 on our business are expected to continue to shift rapidly. Consequently, we will continue to assess our liquidity needs and anticipated capital requirements in light of future developments, particularly those relating to COVID-19.
Commitments
Information about our commitments and contingent liabilities is contained in Note 11 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, provisionally registered swap dealer and from our market-making and proprietary trading in the foreign exchange and commodities and debt securities markets. These financial instruments include futures, forward and foreign exchange contracts, exchange-traded and OTC options, To Be Announced (“TBA”) securities and interest rate swaps. 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 consolidated balance sheets. 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.limits, and market limits change as market conditions change. 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 both clearing organization requirements 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 June 30, 20212022 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 serving 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 record these obligations in the condensed consolidated financial statements as of June 30, 20212022 and September 30, 2020,2021, at fair value of the related financial instruments, totaling $1,764.2$2,537.5 million and $686.0$1,771.2 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, 2021,2022, which might be partially or wholly offset by gains in the value of assets held as of June 30, 2021.2022. The totals of $1,764.2$2,537.5 million and $686.0$1,771.2 million include a net liability of $477.1$445.6 million and $176.8$368.5 million for derivatives, based on their fair value as of June 30, 20212022 and September 30, 2020,2021, 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 June 30, 20212022 and September 30, 2020.2021.
Effects of Inflation
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.
Other Accounting Policies
Note 1 to the Consolidated Financial Statements included within the most recent Annual Report filed on Form 10-K includes our significant accounting policies. There have been no material changes to these policies, except as described below:
During the three months ended December 31, 2021, the Company began executing interest rate swaps, which it designated as hedging instruments. Beginning with the three months ended March 31, 2022, the financial statement impact related to these activities became more significant, with the previous quarter’s effects being negligible. The Company accounted for its interest rate swaps under ASC 815-30-35-3, which dictates that, given continued highly effective character of the hedging instrument, changes in fair value be recorded within other comprehensive income. Swap settlements will be reclassified to earnings, net of accruals, in the period in which a given swap is settled.
Accounting Development Updates
None.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
Credit Risk
See also Note 4 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 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, including:
•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 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.
We are exposed to market risk in connection with our retail trading activities. Because we act as counterparty to our retail customers’ transactions, we are exposed to risk on each trade that the value of our position will decline. Accordingly, accurate and efficient management of our net exposure is a high priority, and we have developed policies addressing both our automated and manual procedures to manage our exposure. These risk-management policies and procedures are established and reviewed regularly by the Risk Committee of our Board of Directors. Our risk-management policies require quantitative analyses by instrument, as well as assessment of a range of market inputs, including trade size, dealing rate, customer margin and market liquidity. Our risk-management procedures require our team of senior traders to monitor risk exposure on a continuous basis and update senior management both informally over the course of the trading day and formally through intraday and end of day reporting. A key component of our approach to managing market risk is that we do not initiate market positions for our own account in anticipation of future movements in the relative prices of products we offer.
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 months ended June 30, 2021.
In our Securities market-making and trading activities, we maintain inventories of equity and debt securities. In our Commercial segment, our positions include physical commodities inventories, precious metals on lease, 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 primarily consist of securities trading in connection with U.S. Treasury, U.S. government agency, agency mortgage-backed and agency asset-backed obligations, as well as investment grade, high-yield, convertible and emerging markets debt securities. Derivative instruments, which consist of futures, 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 mortgage-backed securities.
In addition, we generate interest income from the positive spread earned on 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 or better 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 or counterparty. We estimate that as of June 30, 2022, an immediate 25 basis point decrease in short-term interest rates would result in approximately $8.0 million less in annual net income, assuming an effective tax rate of 27.5%.
In December 2021, we began to use derivative financial instruments in the form of Contentsinterest rate swaps to hedge a portion of our aggregate interest rate position. Our objective is to invest the majority of customer segregated deposits in high quality, short-term investments and swap a portion of the resulting variable interest earnings into medium-term fixed-interest earnings.
These hedges are designated cash flow hedges, through which the Company mitigates uncertainty in its interest income by converting floating-rate interest income to fixed-rate interest income. While the swaps mitigate interest rate risk, they do introduce credit risk, which is the possibility that the Company’s trading counterparty fails to meet its obligation. The Company minimizes this risk through exchanging of collateral and by entering into swaps with highly rated, well-capitalized institutions. In addition to credit risk, there is market risk associated with the swap positions. The Company’s market risk is limited, because any amounts the Company must pay from having exchanged variable interest will be funded by the variable interest the Company receives on its deposits.
We manage interest expense using a combination of variable and fixed rate debt. As of June 30, 2022, $508.2 million of outstanding principal debt was variable-rate debt. The variable-rate debt instruments are carried at their unpaid principal balance which approximates fair value. As of June 30, 2021, $446.2 million of outstanding principal 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, 2021, $348.32022, $348.4 million of outstanding principal debt was fixed-rate long-term debt. As of June 30, 2022, the fixed-rate debt had a fair value of $351.7 million.
Foreign Currency Risk
Currency risk arises from the possibility that fluctuations in foreign exchange rates will impact the value of our earnings and assets. Entities that have assets and liabilities denominated in currencies other than the primary economic environment in which the entity operates are subject to remeasurement. VirtuallyThe majority of all sales and related operating costs are denominated in the currency of the local country and translated into USD for consolidated reporting purposes. Although the majority of the assets and liabilities of these subsidiaries are denominated in the functional currency of the subsidiary, they may also hold assets or liabilities denominated in other currencies. As a result, our results of operations and financial position are exposed to changing currency rates. We may consider entering into hedging transactions to mitigate our exposure to foreign currency exchange rates. These hedging transactions may not be successful.
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, 2021.2022. Our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures were effective to provide reasonable assurance that their objectives were met as of June 30, 2021.2022.
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, 20212022 that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
PART II
Item 1. Legal Proceedings
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, 2020.2021. 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 December 16, 2020,August 25, 2021, our Board of Directors authorized the repurchase of up to 1.0 million shares of our outstanding common stock from time to time in open market purchases and private transactions, commencing on December 23, 2020October 1, 2021 and ending on September 30, 2021.2022. The repurchases are 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 covenant.covenants.
Our common stock repurchase program activity for the three months ended June 30, 20212022 was as follows:
| Period | Total Number of Shares Purchased | 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 1, 2021 to April 30, 2021 | — | $ | — | — | 1,000,000 | ||||||||||||||||||
| May 1, 2021 to May 31, 2021 | — | — | — | 1,000,000 | |||||||||||||||||||
| June 1, 2021 to June 30, 2021 | 50,000 | 62.48 | 50,000 | 950,000 | |||||||||||||||||||
| Total | 50,000 | $ | 62.48 | 50,000 | |||||||||||||||||||
| Period | Total Number of Shares Purchased | 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 1, 2022 to April 30, 2022 | — | $ | — | — | 1,000,000 | ||||||||||||||||||
| May 1, 2022 to May 31, 2022 | — | — | — | 1,000,000 | |||||||||||||||||||
| June 1, 2022 to June 30, 2022 | — | — | — | 1,000,000 | |||||||||||||||||||
| Total | — | $ | — | — | |||||||||||||||||||
Item 6. Exhibits
64
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.
StoneX Group Inc.
| Date: | August | /s/ Sean M. O’Connor | ||||||||||||
| Sean M. O’Connor | ||||||||||||||
| Chief Executive Officer | ||||||||||||||
| Date: | August | /s/ William J. Dunaway | ||||||||||||
| William J. Dunaway | ||||||||||||||
| Chief Financial Officer | ||||||||||||||