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What changed in StoneX Group Inc.'s 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of StoneX Group Inc.'s 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+391 added−389 removedSource: 10-K (2023-11-24) vs 10-K (2022-11-29)

Top changes in StoneX Group Inc.'s 2023 10-K

391 paragraphs added · 389 removed · 301 edited across 6 sections

Item 1. Business

Business — how the company describes what it does

72 edited+12 added−15 removed152 unchanged
Biggest changeIn December 2020, we acquired EncoreFx Inc., which was incorporated in the State of Washington, and is registered as a Money Services Business with the Financial Crimes Enforcement Network (“FinCEN”), having 33 state money transmitter licenses and whose primary operations include providing foreign-currency exchange risk management and global payment solutions services to small and medium sized businesses.
Biggest changeIts primary operations include providing foreign-currency exchange risk management and global payment solutions services to small and medium sized businesses engaged in the import and export industry. Regulation Overview Our business and the industries in which we operate are highly regulated.
We must comply with a wide range of requirements imposed by the SEC, state securities commissions, the 11 Table of Contents Municipal Securities Rulemaking Board (“MSRB”) and the Financial Industry Regulatory Authority (“FINRA”). These regulatory bodies safeguard the integrity of the financial markets and protect the interests of investors in these markets.
We must comply with a wide range of requirements imposed by the SEC, state securities commissions, the Municipal Securities Rulemaking Board (“MSRB”) and the Financial Industry Regulatory Authority 11 Table of Contents (“FINRA”). These regulatory bodies safeguard the integrity of the financial markets and protect the interests of investors in these markets.
We continually analyze and monitor gender and ethnicity across our employee population and report regularly into Executive Committee and the Board. Foreign Operations We operate in a number of foreign jurisdictions, including Canada, Ireland, the U.K., Cyprus, Luxembourg, Germany, Spain, Argentina, Brazil, Colombia, Uruguay, Paraguay, Mexico, Nigeria, Dubai, China, India, Hong Kong, Australia, Singapore, Japan, Cayman Islands, Bermuda and Poland.
We continually analyze and monitor gender and ethnicity across our employee population and report regularly into Executive Committee and the Board. Foreign Operations We operate in a number of foreign jurisdictions, including Canada, Ireland, the U.K., Cyprus, Luxembourg, Germany, Argentina, Brazil, Colombia, Uruguay, Paraguay, Mexico, Nigeria, Dubai, China, India, Hong Kong, Australia, Singapore, Japan, Cayman Islands, Bermuda and Poland.
Our financial network connects our clients to over 40 derivatives exchanges, 185 foreign exchange markets, most global securities exchanges and over 18,000 over-the-counter markets. Execution We provide trade execution services to our clients via both high-touch service and electronically through a wide variety of technology platforms that connects them to markets across the globe.
Our financial network connects our clients to over 40 derivatives exchanges, 185 foreign exchange markets, most global securities exchanges and over 18,000 over-the-counter markets. Execution We provide trade execution services to our clients via both high-touch service and electronically through a wide variety of technology platforms that connect them to markets across the globe.
The client assets (“CASS”) rules in the MIFID regulations include those that govern the handling of client money and other assets which, under certain circumstances must be segregated from the firm’s own assets. CFD’s referencing cryptocurrencies The FCA has adopted rules to ban the sale of CFDs referencing cryptocurrencies to retail consumers, which became effective in January 2021.
The client assets (“CASS”) rules in the FCA regulations include those that govern the handling of client money and other assets which, under certain circumstances must be segregated from the firm’s own assets. CFD’s referencing cryptocurrencies The FCA has adopted rules to ban the sale of CFDs referencing cryptocurrencies to retail consumers, which became effective in January 2021.
We make markets in more than 16,000 equities on the NYSE, NASDAQ, and various OTC markets, including ETFs and over 7,000 ADRs, GDRs and foreign securities making us one of the leading market makers in foreign securities. In addition, we will make prices in more than 10,000 foreign equities listed on foreign exchanges.
We make markets in more than 16,000 equities on the NYSE, NASDAQ, and various OTC markets, including ETFs and over 7,000 ADRs, GDRs and foreign securities making us one of the leading market makers in foreign securities. In addition, we make prices in more than 10,000 foreign equities listed on foreign exchanges.
Retail Forex Client Assets As a Retail Foreign Exchange dealer (“RFED”) registered with the CFTC and member of NFA, we maintain deposits from clients relating to their trading of OTC foreign exchange contracts whereby we act as counterparty to client trading activity making it subject to CFTC regulation 5.8, which specifies that such funds must be held in designated accounts at qualifying institutions in the United States or money center countries as defined by CFTC regulation 1.49.
Retail Forex Client Assets As a Retail Foreign Exchange dealer (“RFED”) registered with the CFTC and member of NFA, we maintain deposits from clients relating to their trading of OTC foreign exchange contracts whereby we act as counterparty to client trading activity making us subject to CFTC regulation 5.8, which specifies that such funds must be held in designated accounts at qualifying institutions in the United States or money center countries as defined by CFTC regulation 1.49.
Secured Client Assets We maintain client secured deposits from our clients relating to their trading of futures and options on futures traded on, or subject to the rules of, a foreign board of trade, making it subject to CFTC Regulation 30.7, which requires that such funds must be carried in separate accounts in an amount sufficient to satisfy all of our current obligations to clients trading foreign futures and foreign options on foreign commodity exchanges or boards of trade, which are designated as secured clients’ accounts.
Secured Client Assets We maintain client secured deposits from our clients relating to their trading of futures and options on futures traded on, or subject to the rules of, a foreign board of trade, making us subject to CFTC Regulation 30.7, which requires that such funds must be carried in separate accounts in an amount sufficient to satisfy all of our current obligations to clients trading foreign futures and foreign options on foreign commodity exchanges or boards of trade, which are designated as secured clients’ accounts.
Over the last 13 years since the financial crisis, the global banks have increased the minimum size of clients they are willing to serve, in part due to decreasing profit margins often driven by regulation, such as the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”) in the United States and the revised Markets in Financial Instruments Directive (“MiFID II”) and accompanying regulation, Markets in Financial Instruments Regulation (“MiFIR”) in Europe.
Over the last 14 years since the financial crisis, global banks have increased the minimum size of clients they are willing to serve, in part due to decreasing profit margins often driven by regulation, such as the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”) in the United States and the revised Markets in Financial Instruments Directive (“MiFID II”) and accompanying regulation, Markets in Financial Instruments Regulation (“MiFIR”) in Europe.
Specifically, we are subject to the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001 (the “USA PATRIOT Act”), which requires that we maintain a comprehensive anti-money laundering (“AML”) program, a customer identification program (CIP), designate an AML compliance officer, provide specified employee training and conduct an annual independent audit of our AML program.
Specifically, we are subject to the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001 (the “USA PATRIOT Act”), which requires that we maintain a comprehensive anti-money laundering (“AML”) program, a customer identification program (“CIP”), designate an AML compliance officer, provide specified employee training and conduct an annual independent audit of our AML program.
Accordingly, under these rules, we are required to: • report all derivative contracts and their lifecycle events (concluded, modified and terminated) to which we are a party to a trade repository either by ourselves or through a third party; • keep all records relating to concluding of derivative contracts and any subsequent modification for 5 years; • comply with the risk management requirements for OTC bilateral derivatives, including portfolio reconciliation, portfolio compression, record keeping, dispute resolution and margining; and • clear through central counterparties all OTC derivatives which will be subject to the mandatory clearing obligation.
Accordingly, under these rules, we are required to: 14 Table of Contents • report all derivative contracts and their lifecycle events (concluded, modified and terminated) to which we are a party to a trade repository either by ourselves or through a third party; • keep all records relating to concluding of derivative contracts and any subsequent modification for 5 years; • comply with the risk management requirements for OTC bilateral derivatives, including portfolio reconciliation, portfolio compression, record keeping, dispute resolution and margining; and • clear through central counterparties all OTC derivatives which will be subject to the mandatory clearing obligation.
Segregated Client Assets We maintain client segregated deposits from our clients relating to their trading of futures and options on futures on U.S. commodities exchanges, making it subject to CFTC regulation 1.20, which specifies that such funds must be held in segregation and not commingled with the firm’s own assets.
Segregated Client Assets We maintain client segregated deposits from our clients relating to their trading of futures and options on futures on U.S. commodities exchanges, making us subject to CFTC regulation 1.20, which specifies that such funds must be held in segregation and not commingled with the firm’s own assets.
Certain market intermediaries, predominantly investment banks, also provide advisory services, securities underwriting, loan syndications, security-based lending products and services, custodial services, investment research products, asset management services and technology platforms for client connectivity. Competitors in the securities and clearing and execution segments include global banks, institutional broker-dealers, correspondent clearers, independent broker-dealers, clearing FCMs and market-makers.
Certain market intermediaries, predominantly investment banks, also provide advisory services, securities underwriting, loan syndications, security-based lending products and services, custodial services, investment research products, asset management services and technology platforms for client connectivity. Competitors in the securities and clearing and execution businesses include global banks, institutional broker-dealers, correspondent clearers, independent broker-dealers, clearing FCMs and market-makers.
(“SA Stone”), member FINRA/SIPC, together with its affiliated SEC-registered investment advisor, SA Stone Investment Advisors Inc., provides an integrated platform of technology, comprehensive wealth management and investment services to registered representatives, investment advisor representatives and registered investment advisors nationwide. The firm supports more than 460 independent professionals with best-in-class service and products.
(“SA Stone”), member FINRA/SIPC, together with its affiliated SEC-registered investment advisor, SA Stone Investment Advisors Inc., provides an integrated platform of technology, comprehensive wealth management and investment services to registered representatives, investment advisor representatives and registered investment advisors nationwide. The firm supports more than 400 independent professionals with best-in-class service and products.
In our precious metals trading activities, we act as a principal, committing our own capital to buy and sell precious metals on a spot and forward basis.
In our precious metals activities, we act as a principal, committing our own capital to buy and sell precious metals on a spot and forward basis.
Physical Trading We act as a principal to support the needs of our clients in a variety of physical commodities, primarily precious metals, as well as across the commodity complex, including energy commodities, grains, oil seeds, cotton, coffee, cocoa, edible oils and feed products.
Physical Trading We act as a principal to support the needs of our clients in a variety of physical commodities, primarily precious metals, as well as across the commodity complex, including energy and renewable fuels, grains, oil seeds, cotton, coffee, cocoa, edible oils and feed products.
Net Capital Requirements Many of our subsidiaries are regulated and subject to minimum and/or net capital requirements. All of our subsidiaries are in compliance with their capital regulatory requirements as of September 30, 2022. Additional information on our subsidiaries subject to significant net capital and minimum net capital requirements can be found in Note 21 to the Consolidated Financial Statements.
Net Capital Requirements Many of our subsidiaries are regulated and subject to minimum and/or net capital requirements. All of our subsidiaries are in compliance with their capital regulatory requirements as of September 30, 2023. Additional information on our subsidiaries subject to significant net capital and minimum net capital requirements can be found in Note 21 to the Consolidated Financial Statements.
Through our platforms and our commitment to client service, we believe we are able to provide simple and fast execution, ensuring delivery of funds in local currency to any of these countries quickly through our global network of correspondent banks.
Through our platforms and our commitment to client service, we believe we are able to provide simple and fast execution, ensuring delivery of funds in local currency to any of the countries we service quickly through our global network of correspondent banks.
Clearing involves the matching of clients’ trades with the exchange, the collection and management of client margin deposits to support the transactions, and the accounting and reporting of the transactions to clients. As of September 30, 2022, our U.S.
Clearing involves the matching of clients’ trades with the exchange, the collection and management of client margin deposits to support the transactions, and the accounting and reporting of the transactions to clients. As of September 30, 2023, our U.S.
In addition, we selectively pursue small- to medium-sized acquisitions, focusing primarily on targets that satisfy specified criteria, including client-centric organizations that may help us expand into new asset classes, client segments and geographies where we currently have a small or limited market presence. 3 Table of Contents We believe we are well positioned to capitalize on key trends impacting the financial services sector.
In addition, we selectively pursue small- to medium-sized acquisitions, focusing primarily on targets that satisfy specified criteria, including client-centric organizations that may help us expand into new asset classes, client segments and geographies where we currently have a small or limited market presence. We believe we are well positioned to capitalize on key trends impacting the financial services sector.
Our entrepreneurial culture ties pay to performance in a variety of ways, including incentive compensation, merit-based bonus programs and variable compensation. We also encourage our employees to acquire an ownership stake in our business by sponsoring stock option and restricted stock plans for directors, officers and employees.
Our entrepreneurial culture ties pay to performance in a variety of ways, including incentive compensation, merit-based bonus programs and variable compensation. We grant options and restricted stock to our employees and also encourage our employees to acquire an ownership stake in our business by sponsoring restricted stock plans for directors, officers and employees.
This has presented an opportunity for non-bank participants in this industry, such as us, to acquire small and mid-sized clients and take market share.
This has presented an opportunity for non-bank participants in this industry, such as us, to acquire small and mid-sized clients and increase market share.
Independent providers have entered the market, leveraging technology to lower client acquisition costs and providing an enhanced client experience through online platforms. In the global payments market, we believe we are one of those independent providers and disruptors offering significant value to our bank, corporate and NGO/charities clients, providing competitive and transparent payments solutions. Subsequent Acquisition Cotton Distributors Inc.
Independent providers have entered the market, leveraging technology to lower client acquisition costs and providing an enhanced client experience through online platforms. In the global payments market, we believe we are one of those independent providers and disruptors offering significant value to our bank, corporate and NGO/charities clients, providing competitive and transparent payments solutions.
We provide prime brokerage services in major foreign currency pairs and swap transactions to institutional clients. Additionally, we provide clearing of foreign exchange transactions, in addition to clearing of a wide range of over-the-counter (“OTC”) products.
We provide prime brokerage services in major foreign currency pairs and swap transactions to institutional clients. Additionally, we provide clearing of foreign exchange transactions, as well as clearing of a wide range of over-the-counter (“OTC”) products.
We are required to comply with a wide range of requirements imposed by the Commodity Futures Trading Commission (the “CFTC”) and the National Futures Association (the “NFA”). Similarly, t he securities industry in the U.S. is subject to extensive regulation under federal and state securities laws.
We are required to comply with a wide range of requirements imposed by the Commodity Futures Trading Commission (the “CFTC”) and the National Futures Association (the “NFA”). Similarly, t he securities industry in the United States is subject to extensive regulation under federal and state securities laws.
Industry participants include producers/end-users, wholesalers and merchants, corporations, introducing brokers, grain elevators, merchandisers, importer/exporter and market intermediaries such as FCMs and swaps dealers, and liquidity venues such as commodity exchanges, financial exchanges and OTC markets.
Competitive Environment - Commercial Segment Industry participants include producers/end-users, wholesalers and merchants, corporations, introducing brokers, grain elevators, merchandisers, importer/exporter and market intermediaries such as FCMs and swaps dealers, and liquidity venues such as commodity exchanges, financial exchanges and OTC markets.
Privacy and Data Protection Our business is subject to rules and regulations adopted by state, federal and foreign governments, and regulatory organizations governing data privacy, including for example the California Consumer Privacy Act (CCPA) and the European General Data Protection Regulation (GDPR).
Privacy and Data Protection Our business is subject to rules and regulations adopted by state, federal and foreign governments, and regulatory organizations governing data privacy, including for example the California Consumer Privacy Act (“CCPA”) and the European General Data Protection Regulation (“GDPR”).
Global Payments We provide customized payment, technology and treasury services to banks and commercial businesses as well as charities and non-governmental and government organizations. We provide transparent pricing and offer local currency payments services in more than 185 countries and 140 currencies, which we believe is more than any other payments solutions provider.
Global Payments We provide customized payment, technology and treasury services to banks and commercial businesses as well as charities, NGOs and government organizations. We provide transparent pricing and offer local currency payments services in more than 180 countries and 140 currencies, which we believe is more than any other payments solutions provider.
We are also a broker-dealer in Argentina, Brazil and in the United Kingdom (“U.K.”), where we are active in providing institutional executions in the local capital markets. We act as an institutional dealer in fixed income securities, including U.S.
We are also a broker-dealer in Argentina, Brazil and in the U.K., where we are active in providing institutional executions in the local capital markets. We act as an institutional dealer in fixed income securities, including U.S.
Exchange Memberships Through our various operating subsidiaries, we are member of a number of exchanges, including the Chicago Mercantile Exchange, the Chicago Board of Trade, the New York Mercantile Exchange, COMEX, InterContinental Exchange, Inc., the New Zealand Exchange, the Minneapolis Grain Exchange, the London Metal Exchange, ICE Europe Ltd, Euronext Amsterdam, Euronext Paris, European Energy Exchange, Norexco ASA, the Rosario Futures Exchange, ICE Futures Abu Dhabi, Small Exchange, Inc., Nodal Exchange and the Singapore Exchange.
Exchange Memberships Through our various operating subsidiaries, we are member of a number of exchanges, including the Chicago Mercantile Exchange, the Chicago Board of Trade, the New York Mercantile Exchange, COMEX, InterContinental Exchange, Inc., the Minneapolis Grain Exchange, the London Metal Exchange, ICE Europe Ltd, Eurex Exchange, Dubai Mercantile Exchange, Euronext Amsterdam, Euronext Paris, European Energy Exchange, B3 S.A., Bitnomial Exchange LLC, Norexco ASA, the Rosario Futures Exchange, ICE Futures Abu Dhabi, Small Exchange, Inc., Nodal Exchange and the Singapore Exchange.
FINCEN CDD Final Rule Additionally, our US legal entities qualifying as covered financial institutions are subject to the Customer Due Diligence Rule (“the CDD Rule”), which clarifies and strengthens customer due diligence requirements. This applies to our US brokers dealer(s) in securities, futures commission merchants, and introducing brokers in commodities.
FINCEN CDD Final Rule Additionally, our US legal entities qualifying as covered financial institutions are subject to the Customer Due Diligence Rule (“the CDD Rule”), which clarifies and strengthens customer due diligence requirements. This applies to our U.S. broker dealer(s) in securities, FCMs, and introducing brokers in commodities.
As reported in the Boston Consulting Group 2022 Global Payments Report, global payments revenues reached $1.5 trillion in 2021 and are expected to grow to $3.3 trillion in 2031 with Latin America, the Middle East, Africa and Europe expected to see the highest growth rates during this period which we believe has potential to directly benefit our payments business.
As reported in the Boston Consulting Group 2023 Global Payments Report, global payments revenues reached $1.6 trillion in 2022 and are expected to grow to $2.2 trillion in 2027 with Latin America, the Middle East, Africa and Europe expected to see the highest growth rates during this period which we believe has potential to directly benefit our payments business.
Treasury, E.U. or OFAC (as required in the U.S.) EMIR The E.U. European Market Infrastructure Regulation (Regulation (EU) 648/2012) (“EMIR”) imposes requirements on entities that enter into any form of derivative contract and applies directly to firms in the E.U. that trade derivatives and indirectly to non-E.U. firms that trade derivatives with E.U. firms.
European Market Infrastructure Regulation (Regulation (EU) 648/2012) (“EMIR”) imposes requirements on entities that enter into any form of derivative contract and applies directly to firms in the E.U. that trade derivatives and indirectly to non-E.U. firms that trade derivatives with E.U. firms.
We believe we are one of the leading mid-market clearers in the securities industry, with approximately 95 correspondent clearing relationships with over $20 billion in assets under management or administration as of September 30, 2022.
We believe we are one of the leading mid-market clearers in the securities industry, with approximately 100 correspondent clearing relationships with over $23 billion in assets under management or administration as of September 30, 2023.
This requires high quality managers, a clear communication of performance objectives and strong financial and compliance controls. We believe this strategy will enable us to build a more scalable and significantly larger organization that embraces an entrepreneurial approach to business, supported and underpinned by strong centralized financial and compliance controls. Available Information Our internet address is www.stonex.com.
We believe this strategy will enable us to build a more scalable and significantly larger organization that embraces an entrepreneurial approach to business, supported and underpinned by strong centralized financial and compliance controls. Available Information Our internet address is www.stonex.com.
Across the U.K. and E.U., the respective transpositions of the Market Abuse Regulation, and the General Data Protection Regulation, also apply. Applicable regulations also impose regulatory capital, as well as conduct of business, governance, and other requirements on these entities.
In Europe, our regulated subsidiaries are subject to E.U. regulation. Across the U.K. and E.U., the respective transpositions of the Market Abuse Regulation, and the General Data Protection Regulation, also apply. Applicable regulations also impose regulatory capital, as well as conduct of business, governance, and other requirements on these entities.
It entered into a transition period which expired on December 31, 2020. Following the expiration of this transition period, British investment and payment firms have lost the right to conduct business within European Economic Area (“EEA”) states based on their ‘home’ state authorization.
Brexit The U.K. left the E.U. in January 2020 pursuant to a Withdrawal Agreement. It entered into a transition period which expired on December 31, 2020. Following the expiration of this transition period, British investment and payment firms have lost the right to conduct business within European Economic Area (“EEA”) states based on their ‘home’ state authorization.
Our businesses are supported by our global infrastructure of regulated operating subsidiaries, our advanced technology platforms and our team of more than 3,600 employees as of September 30, 2022.
Our businesses are supported by our global infrastructure of regulated operating subsidiaries, our advanced technology platforms and our team of more than 4,000 employees as of September 30, 2023.
Several of our foreign subsidiaries are subject to certain business rules, including those that govern the treatment of client money and other assets which under certain circumstances for certain classes of client must be segregated from the firm’s own assets.
Several of our foreign subsidiaries are subject to certain business rules, including those that govern the treatment of client money and other assets which under certain circumstances for certain classes of client must be segregated from the firm’s own assets. Asia Pacific In the Asia Pacific region, our subsidiaries operate under licenses and/or authority from various regulators.
Operating Segments Our business activities are managed as operating segments and organized into reportable segments as follows: 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 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.
In addition, we act as a principal to facilitate financing, structured pricing and logistics services to clients across the commodity complex, including energy commodities, grains, oil seeds, cotton, coffee, cocoa, edible oils and feed products. We provide financing to commercial commodity-related companies against physical inventories.
In addition, we act as a principal to facilitate financing, structured pricing and logistics services to clients across the commodity complex, including energy and renewable fuels, grains, oil seeds, cotton, coffee, cocoa, edible oils and feed products.
Acquisitions during Fiscal Year 2021 Chasing Returns Limited In August 2021, our wholly owned subsidiary, StoneX Netherlands B.V., acquired Chasing Returns Limited, based in Ireland. Chasing Returns Limited specializes in financial behavioral science designed to assist traders in analyzing trends and decision making. We utilize the capabilities of Chasing Returns Limited to enhance our offerings to retail clients. EncoreFx Ltd.
Acquisitions during Fiscal Year 2021 Chasing Returns Limited In August 2021, our wholly owned subsidiary, StoneX (Netherlands) B.V., acquired Chasing Returns Limited, based in Ireland. Chasing Returns Limited specializes in financial behavioral science designed to assist traders in analyzing trends and decision making.
GAAP”) in accounting for this price risk mitigation. 5 Table of Contents Within this segment we organize our marketing efforts into client industry product lines including agricultural, energy and renewable fuels, metals and various other commodities, servicing commercial producers, end users and intermediaries around the world.
Within this segment we organize our marketing efforts into client industry product lines including agricultural, energy and renewable fuels, metals and various other commodities, servicing commercial producers, end users and intermediaries around the world.
Retail Precious Metals Our physical retail precious metals business is comprised of Coininvest GmbH and European Precious Metal Trading GmbH. Through our websites Coininvest.com and Silver-to-go.com we offer clients the ability to purchase physical gold and other precious metals, in multiple forms, including coins and bars, in denominations of their choice, to add to their investment portfolios.
Retail Precious Metals Our physical retail precious metals business is principally conducted within Coininvest GmbH. Through our website Stonexbullion.com, we offer clients the ability to purchase physical gold and other precious metals, in multiple forms, including coins and bars, in denominations of their choice, to add to their investment portfolios.
An example is the provision of direct electronic access to trading venues authorized in the E.U. StoneX Financial Ltd put in place a comprehensive Brexit contingency plan to mitigate the risks associated with Brexit. This included the transfer of assets, services and clients to StoneX Financial Ltd’s subsidiary (StoneX Financial GmbH) and sister company (StoneX Financial Europe S.A).
StoneX Financial Ltd put in place a comprehensive Brexit contingency plan to mitigate the risks associated with Brexit. This included the transfer of assets, services and clients to StoneX Financial Ltd’s subsidiary (StoneX Financial GmbH) and sister company (StoneX Financial Europe S.A).
Competitive Environment - Commercial Segment The Commercial industry comprises the activities associated with the identification, management, hedging and monitoring of various commodity and financial risks faced by commercial entities in their business cycles, including risks related to interest rates, foreign exchange, agricultural commodities, energy and renewable fuels, industrial metals, precious metals, and other physical commodities.
Operating Segments Our business activities are managed through four operating segments, including Commercial, Institutional, Retail, and Global Payments, as follows: Commercial The Commercial segment comprises the activities associated with the identification, management, hedging and monitoring of various commodity and financial risks faced by commercial entities in their business cycles, including risks related to interest rates, foreign exchange, agricultural commodities, energy and renewable fuels, industrial metals, precious metals, and other physical commodities.
It requires covered financial institutions to establish and maintain written policies and procedures that are reasonably designed to: 13 Table of Contents • identify and verify the identity of customer; • identify and verify the identity of the beneficial owners of companies opening accounts; • understand the nature and purpose of customer relationships to develop customer risk profiles; and • conduct ongoing monitoring to identify and report suspicious transactions and, on a risk basis, to maintain and update customer information.
It requires covered financial institutions to establish and maintain written policies and procedures that are reasonably designed to: • identify and verify the identity of customer; • identify and verify the identity of the beneficial owners of companies opening accounts; • understand the nature and purpose of customer relationships to develop customer risk profiles; and • conduct ongoing monitoring to identify and report suspicious transactions and, on a risk basis, to maintain and update customer information. 13 Table of Contents With respect to the requirement to obtain beneficial ownership information, financial institutions will have to identify and verify the identity of any individual who owns 25 percent or more of a legal entity, and an individual who controls the legal entity.
As such, we provide our employees with comprehensive health benefits and offer a wellness program which focuses on employee health strategies and includes a discount to employee medical premiums for the completion of wellness initiatives.
As such, we provide our employees with comprehensive health benefits and offer a wellness program which focuses on employee health strategies and includes a discount to employee medical premiums for the completion of wellness initiatives. We promote a culture of hard work and achievement that also strives to provide an appropriate work-life balance for our employees.
Treasury Department’s Office of Foreign Assets Control (“OFAC”). The OFAC administered sanctions take many forms, but generally prohibit or restrict trade and investment in and with sanctions targets, and in some cases require blocking of the target’s assets. Violations of any of the OFAC-administered sanctions are punishable by civil fines, criminal fines, and imprisonment.
OFAC The U.S. maintains various economic sanctions programs administered by the U.S. Treasury Department’s Office of Foreign Assets Control (“OFAC”). The OFAC administered sanctions take many forms, but generally prohibit or restrict trade and investment in and with sanctions targets, and in some cases require blocking of the target’s assets.
The FCA is expected to recognize the Global Precious Metals Code in the U.K. following a recent consultation. The CMR requires importers to conduct due diligence on their gold, tantalum, tin, and tungsten supply chains to identify minerals that may have originated from conflict zones.
Conflict Minerals Regulation (“CMR”) became effective in January 2021, and in the U.K, the FCA has recognized the Global Precious Metals Code in the U.K. The CMR requires importers to conduct due diligence on their gold, tantalum, tin, and tungsten supply chains to identify minerals that may have originated from conflict zones.
We have adopted an Affinity Group Policy which provides a framework for groups of employees to interact over areas of common interest, an example being the Women of StoneX program which focuses on supporting and developing our female employees.
We have adopted an Affinity Group Policy which provides a framework for groups of employees to interact over areas of common interest. To date, our employees have formed two affinity groups, the Women of StoneX, which focuses on supporting and developing our female employees, and the Philanthropy group, which aims to inspire, educate and mobilize our employees’ collective giving efforts.
Among others, these trends include the impact of increased regulation on banking institutions and other financial services providers; increased consolidation, especially of smaller sub-scale financial services providers and independent securities clearing firms; the growing importance and complexity of conducting secure cross-border transactions; and the demand among financial institutions to transact with well-capitalized counterparties.
Among others, these trends include the impact of increased regulation on banking institutions and other financial services providers; increased consolidation, especially of smaller sub-scale financial services providers and independent securities clearing firms; the growing importance and complexity of conducting secure cross-border transactions; and the demand among financial institutions to transact with well-capitalized counterparties. 3 Table of Contents We focus on mitigating exposure to market risk, ensuring adequate liquidity to maintain our daily operations and making non-interest expenses variable, to the greatest extent possible.
We generally mitigate the price risk associated with commodities held in inventory through the use of derivatives. We do not elect hedge accounting under accounting principles generally accepted in the United States of America (“U.S.
We provide financing to commercial commodity-related companies against physical inventories. 5 Table of Contents We generally mitigate the price risk associated with commodities held in inventory through the use of derivatives. We do not elect hedge accounting under accounting principles generally accepted in the United States of America (“U.S. GAAP”) in accounting for this price risk mitigation.
On October 31, 2022, our wholly owned subsidiary, StoneX Netherlands B.V., acquired CDI-Societe Cotonniere De Distribution S.A (“CDI”), based in Switzerland. CDI operates a global cotton merchant business with a strong network of producers in Brazil, West Africa, and buyers in the APAC region. The purchase price is approximately $40.0 million, which is CDI’s estimated tangible book value.
In October 2022, our wholly owned subsidiary, StoneX (Netherlands) B.V., acquired CDI-Societe Cotonniere De Distribution S.A (“CDI”), based in Switzerland. CDI operates a global cotton merchant business with a strong network of producers in Brazil and West Africa as well as buyers throughout Asia.
The new requirements are largely based on existing guidance issued by the Organisation for Cooperation and Development (OECD) which StoneX Financial Ltd already applies. The firm has made some amendments to its policies and procedures in anticipation of the regulation and keeps these under review as part of its systems and controls.
The new requirements are largely based on existing guidance issued by the Organisation for Cooperation and Development (“OECD”) which StoneX Financial Ltd already applies, as part of its policies and procedures.
The most significant development contained in the PSD II is the requirement for payment services firms to introduce strong customer authentication (“SCA”) on the payment platforms which was required to be fully implemented by March 2022. 15 Table of Contents Brexit The U.K. left the E.U. in January 2020 pursuant to a Withdrawal Agreement.
Payments Services Regulations 2017 The Payments Services Regulations 2017 (“PSRs”) implemented the second Payments Services Directive (“PSD II”) in the U.K. The most significant development contained in the PSD II is the requirement for payment services firms to introduce strong customer authentication (“SCA”) on the payment platforms which was required to be fully implemented by March 2022.
Failure to comply with our exchange membership requirements could result in a variety of consequence, including, but not limited to fines and revocation of memberships, which would limit on our ability to carry on our business with these exchanges.
These exchanges impose their own requirements on a variety of matters, in some cases addressing capital adequacy, protection of client assets, record-keeping and reporting. 16 Table of Contents Failure to comply with our exchange membership requirements could result in a variety of consequences, including, but not limited to fines and revocation of memberships, which would limit on our ability to carry on our business with these exchanges.
We believe that we have implemented, and that we maintain, appropriate internal practices, procedures and controls to enable us to comply with applicable OFAC requirements. U.S. Patriot Act We are subject to a variety of statutory and regulatory requirements concerning our relationships with clients and the review and monitoring of their transactions.
Patriot Act We are subject to a variety of statutory and regulatory requirements concerning our relationships with clients and the review and monitoring of their transactions.
We promote a culture of hard work and achievement that also strives to provide an appropriate work-life balance for our employees. We conduct employee surveys from time-to-time to collect feedback and incorporate into our planning. In addition, we offer employee assistance programs, including confidential assistance for financial, mental and physical well-being.
We conduct employee surveys annually to collect feedback and incorporate into our planning. In addition, we offer employee assistance programs, including confidential assistance for financial, mental and physical well-being.
European and United Kingdom Regulation The Financial Conduct Authority (“FCA”), the regulator of investment firms in the U.K., regulates our U.K. subsidiary as a Markets in Financial Instruments Directive (“MiFID”) investment firm under U.K. law. In Europe, our regulated subsidiaries are subject to E.U. regulation.
A Beneficial Ownership Form or an acceptable equivalent is also required. These requirements are applied to customers which meet the CDD Rule Criteria. European and United Kingdom Regulation The Financial Conduct Authority (“FCA”), the regulator of investment firms in the U.K., regulates our U.K. subsidiary as a Markets in Financial Instruments Directive (“MiFID”) investment firm under U.K. law.
At the direction of our Executive Committee and in furtherance of our strategies as a whole, our worldwide human resources officers are responsible for developing and executing our human capital 16 Table of Contents strategy.
At the direction of our Executive Committee and in furtherance of our strategies as a whole, our worldwide human resources officers are responsible for developing and executing our human capital strategy. This includes the attraction, acquisition, development and engagement of talent to deliver on our strategy and the design of employee compensation, incentive, welfare and benefits programs.
Finally, we believe that the well-being of our employees is enhanced when they can give back to their local communities or charities and have established the “Collective Giving” program to facilitate participation by our employees in these initiatives and provide a company match for charitable contributions.
Finally, we believe that the well-being of our employees is enhanced when they can give back to their local communities or charities and have established the “Collective Giving” program to facilitate participation by our employees in these initiatives and provide a company match for charitable contributions and volunteer hours. 17 Table of Contents Diversity and Inclusion We believe that we are more successful commercially with a diverse employee population and encourage hiring and promotion practices that focus on the best talent and the most effective performers, regardless of gender, national origin, ethnicity or other protected class.
We seek to leverage our capabilities and capacity in clearing to financial institutions, institutional trading firms, professional traders and introducing brokers as well as offering facilities management or outsourcing solutions to other FCM’s.
FCM held $6.1 billion in required client segregated assets, which makes us one the largest non-bank FCMs in the U.S., as measured by required client segregated assets. We seek to leverage our capabilities and capacity in clearing to financial institutions, institutional trading firms, professional traders and introducing brokers as well as offering facilities management or outsourcing solutions to other FCMs.
The amount of retail forex assets must be in excess of the retail forex liabilities owed to clients and any shortfall in such assets must be immediately communicated to the CFTC.
The amount of retail forex assets must be in excess of the retail forex liabilities owed to clients and any shortfall in such assets must be immediately communicated to the CFTC. Dodd-Frank Like other companies in the financial services industry, the Dodd-Frank Act provides for a number of significant provisions affecting our business.
Without appropriate authorization, British firms are largely restricted to providing business to clients that are domiciled in the EEA on a ‘reverse solicitation’ basis. Furthermore, British investment firms have lost certain rights with respect to access to, or providing their clients with a connection to, certain infrastructural assets that are necessary for the provision of certain services.
Furthermore, British investment firms have lost certain rights with respect to access to, or providing 15 Table of Contents their clients with a connection to, certain infrastructural assets that are necessary for the provision of certain services. An example is the provision of direct electronic access to trading venues authorized in the E.U.
As required, our EMEA Money Laundering Reporting Officer as well as the Money Laundering Reporting Officer appointed in respect of each of the entities in the E.U. provide regular reports on the operation and effectiveness of these systems and controls, including details of our regular assessments of the adequacy of these systems and controls to ensure their compliance with the local regulatory requirements. 14 Table of Contents Our financial crime systems and controls also include routine screening to identify where customers and others with whom we transact may be subject to financial sanctions, including measures initiated or adopted by inter alia the U.K.
As required, our Europe, Middle East and Africa (“EMEA”) Money Laundering Reporting Officer as well as the Money Laundering Reporting Officer appointed in respect of each of the entities in the E.U. provide regular reports on the operation and effectiveness of these systems and controls, including details of our regular assessments of the adequacy of these systems and controls to ensure their compliance with the local regulatory requirements.
We are one of only eight Category One ring dealing members of the London Metals Exchange (the “LME”). Our clients include commercial entities, regional, national and introducing broker-dealers, asset managers, insurance companies, brokers, institutional and individual investors, professional traders, commercial and investment banks as well as government and non-governmental organizations (“NGOs”).
We currently serve more than 54,000 commercial, institutional, and global payments clients, and over 400,000 retail accounts located in more than 180 countries. Our clients include commercial entities, regional, national and introducing broker-dealers, asset managers, insurance companies, brokers, institutional and individual investors, professional traders, commercial and investment banks as well as government and non-governmental organizations (“NGOs”).
The U.K. Investment Firm Prudential Regime (“IFPR”) is intended to introduce a more appropriate regime for investment firms, which are currently regulated under rules designed for banks. StoneX Financial Ltd is not currently expecting that the IFPR will require significant changes to be made to its prudential requirements.
The U.K. Investment Firm Prudential Regime (“IFPR”) introduced a more appropriate regime for investment firms, which are currently regulated under rules designed for banks. StoneX Financial Ltd has implemented all required prudential changes under this regime. E.U. Conflict Minerals Regulation The E.U.
We focus on mitigating exposure to market risk, ensuring adequate liquidity to maintain our daily operations and making non-interest expenses variable, to the greatest extent possible. Our strategy is to utilize a centralized and disciplined process for capital allocation, risk management and cost control, while delegating the execution of strategic objectives and day-to-day management to experienced individuals.
Our strategy is to utilize a centralized and disciplined process for capital allocation, risk management and cost control, while delegating the execution of strategic objectives and day-to-day management to experienced individuals. This requires high quality managers, a clear communication of performance objectives and strong financial and compliance controls.
We are a CFTC provisionally registered swap dealer, whose business is overseen by the NFA. During 2016, CFTC 23.154, Calculation of 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, under which we fall in the final compliance date tier recently extended to September 2022.
We are a CFTC registered swap dealer, whose business is overseen by the NFA. The CFTC imposes rules over net capital requirements, as well as the exchange of initial margin between registered swap dealers and certain counterparties.
Through our London-based Europe, Middle East and Africa (“EMEA”) oil voice brokerage business, we provide brokerage services across the fuel, crude and middle distillates markets to clients throughout EMEA. Foreign Exchange We provide prime brokerage foreign exchange (“FX”) services to financial institutions and professional traders.
Foreign Exchange We provide prime brokerage foreign exchange (“FX”) services to financial institutions and professional traders.
Subsequent to the acquisition, EncoreFx Inc. was renamed as StoneX Payment Services Ltd. 10 Table of Contents Acquisitions during Fiscal Year 2020 Gain Capital Holdings, Inc. In July 2020, we acquired Gain Capital Holdings, Inc.
We utilize the capabilities of Chasing Returns Limited to enhance our offerings to retail clients. 10 Table of Contents EncoreFx Ltd. In December 2020, we acquired EncoreFx Ltd., which was incorporated in the State of Washington, and subsequently renamed as StoneX Payment Services Ltd.
Removed
We currently serve more than 54,000 commercial, institutional, and global payments clients, and over 400,000 retail accounts located in more than 180 countries. We believe we are the third largest independent, non-bank futures commission merchant (“FCM”) in the United States (“U.S.”) as measured by our $6.2 billion in required client segregated assets at our U.S.
Added
One of our subsidiaries is one of the largest non-bank futures commission merchant (“FCM”) in the United States (“U.S.”) as measured by its $6.1 billion in required client segregated assets as of September 30, 2023 and our United Kingdom (“U.K.”) subsidiary is one of only eight Category One ring dealing members of the London Metals Exchange (the “LME”).
Removed
FCM as of September 30, 2022, and making markets in more than 16,000 equities on the NYSE, NASDAQ, and various OTC markets, including exchange-traded-funds (“ETFs”) and over 7,000 ADRs, GDRs and foreign securities making us one of the leading market makers in foreign securities.
Added
Acquisitions during Fiscal Year 2023 Incomm S.A.S. In February 2023, one of the Company’s subsidiaries, StoneX Commodity Solutions LLC acquired all of the outstanding shares of Incomm S.A.S. (“Incomm”), which is based in Colombia.
Removed
FCM held $6.2 billion in required client segregated assets, which we believe makes us the third largest independent, non-bank FCM in the U.S., as measured by required client segregated assets.
Added
Incomm specializes in supporting the import of grain and feed products for Colombian clients and is a proven resource in management of customs clearing, inventory management at destination ports and providing non-recourse trade finance for destination buyers via local Colombian banks. Cotton Distributors Inc.
Removed
(“Gain”), a global provider of trading services and solutions to institutional and retail investors, specializing in both OTC products and exchange-traded futures and options on futures. Gain provides its clients with access to a diverse range of global OTC financial markets, including spot foreign exchange, precious metals, and CFDs (where permitted).
Added
StoneX Payment Services Ltd. is registered as a money services business with the Financial Crimes Enforcement Network (“FinCEN”), and has over thirty state money transmitter licenses in the U.S., is also registered with the Financial Transactions and Reports Analysis Centre of Canada (“FINTRAC”) and holds a money transmitter license in Canada.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

42 edited+18 added−3 removed154 unchanged
Biggest changeAs of September 30, 2022, we had four committed credit facilities under which we could borrow up to $1,000.0 million, consisting of: • a $475.0 million facility for general working capital requirements, committed until April 21, 2025; • a $75.0 million facility for short-term funding of margin to commodity exchanges, committed until March 31, 2023; 24 Table of Contents • a $400.0 million committed facility for financing commodity financing arrangements and commodity repurchase agreements, committed until July 28, 2024; and • a $50.0 million facility for short-term funding of margin to commodity exchanges, committed until October 14, 2023.
Biggest changeAs of September 30, 2023, we had five committed credit facilities under which we could borrow up to $1,200.0 million, consisting of: • a $500.0 million facility for general working capital requirements, committed until April 21, 2026; • a $190.0 million facility for short-term funding of margin to commodity exchanges, committed until October 29, 2024; • a $400.0 million committed facility for financing commodity financing arrangements and commodity repurchase agreements, committed until July 28, 2024; • a $100.0 million facility for short-term funding of margin to commodity exchanges, committed until October 12, 2024; and • a $10.0 million facility for general working capital requirements, committed until September 6, 2024; It is possible that these facilities might not be renewed at the end of their commitment periods and that we will be unable to replace them with other facilities on terms favorable to us or at all.
Although we collect margin or other deposits from our clients for these positions, significant adverse price movements can occur which will require us to post margin or other deposits on short notice, whether or not we are able to collect additional margin or credit support from our clients.
Although we collect margin or other deposits from our clients for these positions, significant adverse price movements can occur which will require us to post margin or other deposits on short notice, whether or not we are able to collect additional margin or credit support from our clients.
The long-term impact of the U.K.’s revised with the E.U. and others is unclear. Brexit could lead to legal uncertainty and potentially divergent national laws and regulations as the U.K. determines which E.U. laws to replace or replicate.
The long-term impact of the U.K.’s revised agreement with the E.U. and others is unclear. Brexit could lead to legal uncertainty and potentially divergent national laws and regulations as the U.K. determines which E.U. laws to replace or replicate.
For a further discussion of litigation risks, see Item 3—Legal Proceedings below and Note 13 - Commitments and Contingencies in the Consolidated Financial Statements. 25 Table of Contents Certain of our subsidiaries are required to maintain significant levels of net capital and if our subsidiaries fail to meet these requirements, we face suspension, expulsion or limitation on our product lines.
For a further discussion of litigation risks, see Item 3—Legal Proceedings below and Note 13 - Commitments and Contingencies in the Consolidated Financial Statements. Certain of our subsidiaries are required to maintain significant levels of net capital and if our subsidiaries fail to meet these requirements, we face suspension, expulsion or limitation on our product lines.
Our revenues and operating results may fluctuate significantly because of the following factors: • market conditions, such as price levels and volatility in the commodities, securities and foreign exchange markets in which we operate; • changes in the volume of our market-making and trading activities; • changes in the value of our financial instruments, currency and commodities positions and our ability to manage related risks; and • the level and volatility of interest rates.
Our revenues and operating results may fluctuate significantly because of the following factors: • market conditions, such as price levels and volatility in the commodities, securities and foreign exchange markets in which we operate; • changes in the volume of our market-making and trading activities; • changes in the value of our financial instruments, currency and commodities positions and our ability to manage related risks; and 18 Table of Contents • the level and volatility of interest rates.
If we are unable to execute our disaster recovery and business continuity plans, or if our plans prove insufficient for a particular situation or take longer than expected to implement in a crisis situation, our business, financial condition and results of operations could be materially adversely affected, and our business interruption insurance may not adequately compensate us for losses that may occur.
If we are unable to execute our disaster recovery and business continuity plans, or if our plans prove insufficient for a particular situation or take longer than expected to implement in a crisis situation, our business, financial condition and results of 23 Table of Contents operations could be materially adversely affected, and our business interruption insurance may not adequately compensate us for losses that may occur.
If our credit facilities are unavailable or are insufficient to support future levels of business activity, our business, financial condition and results of operations may be materially adversely affected. In addition, in such circumstances, we may need to raise additional debt or equity financing on terms that are unattractive or dilutive to our current shareholders.
If our credit facilities are unavailable or are insufficient to 25 Table of Contents support future levels of business activity, our business, financial condition and results of operations may be materially adversely affected. In addition, in such circumstances, we may need to raise additional debt or equity financing on terms that are unattractive or dilutive to our current shareholders.
If we face material delays in introducing new services, products and enhancements, our clients may forego the use of our platforms and use those of our competitors. Further, the adoption of new internet, networking, cloud, telecommunications or blockchain technologies may require us to devote substantial resources to modify and adapt our services.
If we face material delays in introducing new services, products and enhancements, our clients may forego the use of our platforms and use those of our competitors. 24 Table of Contents Further, the adoption of new internet, networking, cloud, telecommunications or blockchain technologies may require us to devote substantial resources to modify and adapt our services.
There have been significant declines in trading volumes in the financial markets generally in the past and there may be similar declines in trading volumes generally or across our platforms in particular in the future. Any one or more of the above factors 18 Table of Contents may contribute to reduced trading volumes.
There have been significant declines in trading volumes in the financial markets generally in the past and there may be similar declines in trading volumes generally or across our platforms in particular in the future. Any one or more of the above factors may contribute to reduced trading volumes.
Moreover, acquisitions could lead to increases in amortization expenses, impairments of goodwill and purchased long-lived assets or restructuring charges, any of which could materially harm our financial condition or results. Acquisitions give rise to unforeseen issues.
Moreover, acquisitions 29 Table of Contents could lead to increases in amortization expenses, impairments of goodwill and purchased long-lived assets or restructuring charges, any of which could materially harm our financial condition or results. Acquisitions give rise to unforeseen issues.
A portion of our trading volume is attributable to clients in jurisdictions in which we or our white label partners are not currently licensed or authorized by the local government or applicable self-regulatory organization.
A portion of our trading volume is attributable to clients in jurisdictions in 27 Table of Contents which we or our white label partners are not currently licensed or authorized by the local government or applicable self-regulatory organization.
Rapidly evolving regulations regarding data privacy could increase our costs and adversely affect our business. Our business is subject to rules and regulations adopted by state, federal and foreign governments, and regulatory organizations governing data privacy, including, but not limited to for example, the California Consumer Privacy Act (CCPA) and the European General Data Protection Regulation (GDPR).
Rapidly evolving regulations regarding data privacy could increase our costs and adversely affect our business. Our business is subject to rules and regulations adopted by state, federal and foreign governments, and regulatory organizations governing data privacy, including, but not limited to for example, the California Consumer Privacy Act (“CCPA”) and the European General Data Protection Regulation (“GDPR”).
Technology and Cybersecurity Risks Internal or third-party computer and communications systems failures, capacity constraints and breaches of security could increase our operating costs and/or credit losses, decrease net operating revenues and cause us to lose clients.
Internal or third-party computer and communications systems failures, capacity constraints and breaches of security could increase our operating costs and/or credit losses, decrease net operating revenues and cause us to lose clients.
Our regulated subsidiaries are subject to a number of requirements to maintain specific levels of net capital. Failure to maintain the required net capital may subject our subsidiaries to suspension or revocation of their license or registration or expulsion from regulatory bodies.
Our regulated subsidiaries are subject to a number of requirements to maintain specific levels of net capital. Failure to maintain the required net capital may subject our 26 Table of Contents subsidiaries to suspension or revocation of their license or registration or expulsion from regulatory bodies.
As we operate or otherwise extend our services in certain jurisdictions without local registration, licensing or authorization, we may be subject to possible enforcement action and sanction for our operations in such jurisdictions if our operations are 26 Table of Contents determined to have violated regulations in those jurisdictions.
As we operate or otherwise extend our services in certain jurisdictions without local registration, licensing or authorization, we may be subject to possible enforcement action and sanction for our operations in such jurisdictions if our operations are determined to have violated regulations in those jurisdictions.
Our failure to maintain 21 Table of Contents our relationships with these introducing brokers or the failure of these introducing brokers to establish and maintain client relationships could result in a loss of revenues, which would adversely affect our business.
Our failure to maintain our relationships with these introducing brokers or the failure of these introducing brokers to establish and maintain client relationships could result in a loss of revenues, which would adversely affect our business.
We must continue to enhance and improve our electronic trading platforms. The financial services 23 Table of Contents industry is characterized by significant structural changes, increasingly complex systems and infrastructures, changes in clients’ needs and preferences and new business models.
We must continue to enhance and improve our electronic trading platforms. The financial services industry is characterized by significant structural changes, increasingly complex systems and infrastructures, changes in clients’ needs and preferences and new business models.
In addition, in connection with our acquisitions, we may be required to issue common stock, which would dilute our existing shareholders, 28 Table of Contents or incur additional debt, which would increase our operating costs and potentially strain our liquidity.
In addition, in connection with our acquisitions, we may be required to issue common stock, which would dilute our existing shareholders, or incur additional debt, which would increase our operating costs and potentially strain our liquidity.
We are heavily dependent on the capacity and reliability of the computer and communications systems supporting our operations, 22 Table of Contents whether owned and operated internally or by vendors or third parties, including those used for execution and clearance of our client’s trades and our market-making activities.
We are heavily dependent on the capacity and reliability of the computer and communications systems supporting our operations, whether owned and operated internally or by vendors or third parties, including those used for execution and clearance of our clients’ trades and our market-making activities.
Dollar against other currencies could adversely affect our results of operations. Our exposure to currency exchange rate fluctuations will grow if the relative contribution of our operations outside the U.S. increases. Any material fluctuations in currencies could have a material effect on our financial condition, results of operations and cash flows.
Our exposure to currency exchange rate fluctuations will grow if the relative contribution of our operations outside the U.S. increases. Any material fluctuations in currencies could have a material effect on our financial condition, results of operations and cash flows.
As of September 30, 2022, $485.1 million of our borrowings are subject to variable interest rates and as such in periods of rising interest rates, our cost of funds will increase, which could reduce our net income. Committed credit facilities currently available to us might not be renewed.
As of September 30, 2023, $341.0 million of our borrowings are subject to variable interest rates and as such in periods of rising interest rates, our cost of funds will increase, which could reduce our net income. Committed credit facilities currently available to us might not be renewed.
Although we closely monitor potential exposures as a result of these fluctuations in currencies and adopt strategies designed to reduce the impact of these fluctuations on our financial results, there can be no assurance that we will be successful in managing our foreign exchange risk and potential movements in the U.S.
Although we closely monitor potential exposures as a result of these fluctuations in currencies and adopt strategies designed to reduce the impact of these fluctuations on our financial results, there can be no assurance that we will be successful in managing our foreign exchange risk and potential movements in the U.S. dollar against other currencies could adversely affect our results of operations.
Any failure to effectively manage these increased operational and cybersecurity demands and risks may materially adversely affect our results of operations and the ability to conduct our business. For a further discussion of cybersecurity risks, see Technology and Cybersecurity Risks below.
In the event of a significant COVID-19 resurgence, any failure to effectively manage these increased operational and cybersecurity demands and risks may materially adversely affect our results of operations and the ability to conduct our business. For a further discussion of cybersecurity risks, see Technology and Cybersecurity Risks below.
Our significant level of indebtedness could adversely affect our business, financial condition and results of operations. As of September 30, 2022, our total consolidated indebtedness was $824.2 million, and we may increase our indebtedness in the future as we continue to expand our business.
Our significant level of indebtedness could adversely affect our business, financial condition and results of operations. As of September 30, 2023, our total consolidated indebtedness was $683.1 million, and we may increase our indebtedness in the future as we continue to expand our business.
As such, the Company is highly dependent on its lines of credit and other financing facilities in order to fund margin calls and other operating activities and the loss of access to these sources of financing could have a material adverse effect on our results of operations, financial condition and cash flows.
As such, the Company is highly dependent on its lines of credit and other financing facilities in order to fund margin calls and other operating activities and the loss of access to these sources of financing could materially adversely affect our results of operations, financial condition and cash flows.
Factors that are particularly likely to affect price volatility and price levels of commodities include supply and demand of commodities, weather conditions affecting certain commodities, national and international economic and political conditions, the perceived stability of commodities and financial markets, the level and volatility of interest rates and inflation and the financial strength of market participants.
Factors that are particularly likely to affect price volatility and price levels of commodities include supply and demand of commodities, weather conditions affecting certain commodities, national and international economic and geopolitical conditions, including the war in Ukraine and the Israel-Hamas war, the perceived stability of commodities and financial markets, the level and volatility of interest rates and inflation and the financial strength of market participants.
A large proportion of our historical growth has been achieved through acquisitions of complementary businesses, technologies or services. Our operating revenues grew from $975.8 million in fiscal 2018 to $2,107.4 million in fiscal 2022 principally as a result of several acquisitions.
A large proportion of our historical growth has been achieved through acquisitions of complementary businesses, technologies or services. Our operating revenues grew from $1,106.1 million in fiscal 2019 to $2,914.1 million in fiscal 2023 principally as a result of several acquisitions.
In addition, the continuation of the COVID-19 pandemic has led to increased operational and cybersecurity risks. These risks include, among others, increased demand on our information technology resources and systems and the increased risk of phishing and other cybersecurity attacks.
In addition, the recent COVID-19 pandemic led to increased operational and cybersecurity risks and may again do so in the future. These risks have included, among others, increased demand on our information technology resources and systems and the increased risk of phishing and other cybersecurity attacks.
To the extent the continuation of the COVID-19 pandemic and the ongoing conflict between Ukraine and Russia adversely affects our business, financial condition, liquidity or results of operations, these events may also have the effect of heightening many of the other risks described herein and in any future Quarterly Reports on Form 10-Q or other filings we make with the SEC. 19 Table of Contents Business Risks We face risks associated with our market-making and trading activities.
To the extent that our business, financial condition, liquidity or results of operations are adversely affected by catastrophic events and crises, including public health emergencies such as the recent COVID-19 pandemic and conflicts such as the wars in Ukraine and Israel, these events may also have the effect of heightening many of the other risks described herein and in any future Quarterly Reports on Form 10-Q or other filings we make with the SEC. 19 Table of Contents Business Risks We face risks associated with our market-making and trading activities.
Our business requires substantial cash to support our operating activities, including in connection with the establishment and carrying of substantial open positions for clients on futures exchanges and in the OTC derivatives markets by posting and maintaining margin or credit support for these positions.
Debt Financing and Indebtedness Risks The success of our business depends on us having access to significant liquidity. Our business requires substantial cash to support our operating activities, including establishing and carrying substantial open positions for clients on futures exchanges and in the OTC derivatives markets by posting and maintaining margin or credit support for these positions.
In addition, our introducing brokers have no obligation to provide new client relationships or minimum levels of transaction volume. To the extent any of our competitors offers more attractive compensation terms to one or more of our introducing brokers, we could lose the brokers’ services or be required to increase the compensation we pay to retain the brokers.
To the extent any of our competitors offers more attractive compensation terms to one or more of our introducing brokers, we could lose the brokers’ services or be required to increase the 21 Table of Contents compensation we pay to retain the brokers.
Those introducing brokers work to establish execution and/or clearing accounts with our entities for those new client relationships but generally serve as the primary relationship and customer service point for those clients. Many of our relationships with introducing brokers are non-exclusive or may be canceled on relatively short notice.
We have relationships with introducing brokers, both domestic and international, who solicit clients for their execution and/or advisory services. Those introducing brokers work to establish execution and/or clearing accounts with our entities for those new client relationships but generally serve as the primary relationship and customer service point for those clients.
The commodity risk management industry is very competitive and we expect competition to continue to intensify in the future. Our primary competitors in this industry include both large, diversified financial institutions and commodity-oriented businesses, smaller firms that focus on specific products or regional markets and independent FCMs.
Our primary competitors in this industry include both large, diversified financial institutions and commodity-oriented businesses, smaller firms that focus on specific products or regional markets and independent FCMs. A number of our competitors have significantly greater financial, technical, marketing and other resources than we have.
We rely on relationships with introducing brokers for obtaining some of our clients and our business or reputation could be harmed by such introducing broker misconduct or errors. We have relationships with introducing brokers, both domestic and international, who solicit clients for their execution and/or advisory services.
As a result, our business, financial condition and results of operations could be materially adversely affected by the loss of these funds. We rely on relationships with introducing brokers for obtaining some of our clients and our business or reputation could be harmed by such introducing broker misconduct or errors.
In addition, the SEC, the CFTC, FINRA, the MSRB, the FCA, the FSA, CySEC, IIROC, the OSC, MAS, ASIC, CIMA, the NFA, the CME Group, Inc. and other self-regulatory organizations (commonly referred to as SROs), state securities commissions, and foreign securities regulators require compliance with their respective rules and regulations.
Office of Special Counsel, the Monetary Authority of Singapore, the Australian Securities and Investments Commission, the Cayman Islands Monetary Authority, the NFA, the CME Group, Inc. and other self-regulatory organizations (commonly referred to as SROs), state securities commissions, and foreign securities regulators require compliance with their respective rules and regulations.
Further, uncertainty around these and related issues could lead to adverse effects on the economy of the U.K. and the other economies in 27 Table of Contents which we operate. There can be no assurance that any or all of these events will not have a material adverse effect on our business, financial results and operations.
Further, uncertainty around these and related issues could lead to adverse effects on the economy of the U.K. and the other economies in which we operate.
We compete primarily with wholesale, national and regional broker-dealers and FCMs, as well as electronic communications networks and retail brokers. We compete primarily on the basis of our expertise and quality of service. We also derive a significant portion of our revenues from commodities risk management services.
The market for these services, particularly market-making services through electronic platforms, is rapidly evolving and intensely competitive. We expect competition to continue and increase in the future. We compete primarily with wholesale, national and regional broker-dealers and FCMs, as well as electronic communications networks and retail brokers. We compete primarily on the basis of our expertise and quality of service.
Our financial position and results of operations may be adversely affected by unfavorable economic and financial market conditions, including the ongoing impact of the COVID-19 pandemic and the conflict between Ukraine and Russia. Economic and financial market conditions, including those caused by the ongoing COVID-19 pandemic and the conflict between Ukraine and Russia and related sanctions imposed by the U.S.
Our financial position and results of operations may be adversely affected by unfavorable economic and financial market conditions as well as catastrophic events and crises such as the recent COVID-19 pandemic, wars and geopolitical tensions.
Our risk management policies and procedures may not prevent us from experiencing a material adverse effect on our financial condition and results of operations and cash flows.
Our risk management policies and procedures may not prevent us from experiencing a material adverse effect on our financial condition and results of operations and cash flows. 22 Table of Contents Technology and Cybersecurity Risks Our revenues, operational costs, regulatory compliance and client satisfaction could be adversely affected by the failure of a vendor or other third party to continue providing services to us.
Competition Risk We are subject to intense competition. We derive a significant portion of our revenues from market-making and trading activities involving securities, commodities and foreign exchange. The market for these services, particularly market-making services through electronic platforms, is rapidly evolving and intensely competitive. We expect competition to continue and increase in the future.
We also derive a significant portion of our revenues from commodities risk management services. The commodity risk management industry is very competitive and we expect competition to continue to intensify in the future.
The securities and derivatives industries are subject to extensive regulation under federal, state and foreign laws.
The securities and derivatives industries are subject to extensive regulation under federal, state and foreign laws. In addition, the SEC, the CFTC, FINRA, the MSRB, the FCA, the Financial Services Authority, the Cyprus Securities and Exchange Commission, the Investment Industry Regulatory Organization of Canada, the U.S.
In the event of the insolvency of one of these financial institutions, we might not be able to fully recover the assets we have deposited since, in certain cases, we will be among the institution’s unsecured creditors. As a result, our business, financial condition and results of operations could be materially adversely affected by the loss of these funds.
If other banks and financial institutions enter receivership or become insolvent in the future in response to financial conditions affecting the banking system and financial markets, we might not be able to fully recover the assets we have deposited, or deposited on our customers’ behalf, since in certain cases, we will be among the institution’s unsecured creditors.
Removed
Debt Financing and Indebtedness Risks The success of our business depends on us having access to significant liquidity.
Added
Economic and financial market conditions, including conditions impacted by public health emergencies, such as the recent COVID-19 pandemic, and geopolitical events such as terrorism, the Israel-Hamas war and escalating tensions in the Middle East, the ongoing war between Ukraine and Russia and related sanctions imposed by the U.S.
Removed
It is possible that these facilities might not be renewed at the end of their commitment periods and that we will be unable to replace them with other facilities on terms favorable to us or at all.
Added
Although we did not have any material deposits with any of the banks affected by the banking crisis (such as the closure of Silicon Valley Bank, receiverships of First Republic Bank and Signature Bank, and acquisition of Credit Suisse Group AG), we could experience losses on our holdings of cash and investments due to failures of other financial institutions and other parties.
Removed
A number of our competitors have significantly greater financial, technical, marketing and other resources than we have.
Added
Many of our relationships with introducing brokers are non-exclusive or may be canceled on relatively short notice. In addition, our introducing brokers have no obligation to provide new client relationships or minimum levels of transaction volume.
Added
We rely on vendors and other third-parties to provide us with services that are essential to our ability to provide clients with our products and services. These services range from core infrastructure, such as utilities, communications and web hosting services, to systems that allow us to execute and process transactions entered into by our clients.
Added
If these vendors or other third-parties suffer operations issues, including as a result of cyber attacks, and they are unable to continue to provide these services to us, we may be exposed to a variety of risks, including loss of revenue if our clients cannot trade with us, increased costs if we are required to employ alternative solutions and reputational harm.
Added
In addition, some of our vendors hold sensitive information on our behalf, including personally identifiable information relating to our clients.
Added
If this data were to be compromised, either as a result of a cyber attack or otherwise, we could be in breach of our obligations to our clients, as well as applicable data protections laws, which could materially adversely affect our results of operations and reputation.
Added
Cyber attacks directed at our vendors may also make us more vulnerable to being targeted for cyber attacks ourselves if the bad actors are able to obtain information relating to our company and / or systems.
Added
If one of our vendors experiences a cyberbreach of its own systems or has data that it holds misappropriated, we could be exposed to a number of additional risks, including: a. heightened risk that we will not be able to comply with applicable regulatory requirements; b. increased risk that external parties will be able to execute fraudulent transactions using our systems; c. losses from fraudulent transactions, as well as potential liability for losses suffered by our clients; d. increased operational costs to remediate the consequences of the external party’s security breach; and e. reputational harm arising from the perception that our systems may not be secure.
Added
In some cases, operational issues or security breaches affecting our vendors may require us to take steps to protect the integrity of our own operational systems or to safeguard confidential information that we hold, including restricting the ability of our clients to trade or have access to their accounts.
Added
These actions could potentially diminish customer satisfaction and confidence in us, materially adversely affecting our results of operations.
Added
For example, on January 31, 2023, we were notified by ION Group, one of our vendors which provides back office trade processing services relating to certain of our listed derivatives businesses, that it had experienced a cybersecurity incident, which rendered certain of its services inaccessible to us and its other clients.
Added
As a result of the incident, we imposed restrictions on clients of our UK subsidiary relating to the trading of listed derivatives. During February 2023, these services were restored and the restrictions on clients’ activities were lifted .
Added
Furthermore, the widespread and expanding interconnectivity among financial institutions, clearing banks, CCPs, payment processors, financial technology companies, securities exchanges, clearing houses and other financial market infrastructures increases the risk that the disruption of an operational system involving one institution or entity, including due to a cyber attack, may cause industry-wide operational disruptions that could materially affect our ability to conduct business.
Added
In addition, tightening of the credit markets could limit our ability to obtain external financing to fund our operations and capital expenditures, if and when needed.
Added
For example, Signature Bank was a lender under certain of our facilities, and although we did not experience any adverse impact upon the receivership of Signature Bank, we could experience reduced access to liquidity due to failures of other financial institutions and other parties.
Added
If other banks and financial institutions enter receivership or become insolvent in the future in response to financial conditions affecting the banking system and financial markets, our ability to access our existing cash, cash equivalents and investments may be threatened and could substantially and negatively impact our financial condition and ability to do business.
Added
There can be no assurance that any or all of these events will not have a material adverse effect on our business, financial results and operations. 28 Table of Contents Competition Risk We are subject to intense competition. We derive a significant portion of our revenues from market-making and trading activities involving securities, commodities and foreign exchange.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeItem 3. Legal Proceedings For information regarding certain legal proceedings to which we are currently a party, see Note 13, “Commitments and Contingencies - Legal and Regulatory Proceedings” in the notes to our Consolidated Financial Statements included in this Annual Report on Form 10-K. Item 4. Mine Safety Disclosures Not applicable. 29 Table of Contents PART II
Biggest changeItem 3. Legal Proceedings For information regarding certain legal proceedings to which we are currently a party, see Note 13, “Commitments and Contingencies - Legal and Regulatory Proceedings” in the notes to our Consolidated Financial Statements included in this Annual Report on Form 10-K. Item 4. Mine Safety Disclosures Not applicable. 30 Table of Contents PART II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeOur common stock repurchase program activity for the three months ended September 30, 2022 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 (1) July 1, 2022 to July 31, 2022 — $ — — 1,000,000 August 1, 2022 to August 31, 2022 — — — 1,000,000 September 1, 2022 to September 30, 2022 — — — 1,000,000 Total — $ — — Information relating to compensation plans under which our equity securities are authorized for issuance is set forth in Part III, Item 12 of our Annual Report on Form 10-K.
Biggest changeOur common stock repurchase program activity for the three months ended September 30, 2023 was as follows: Period Total Number of Shares Purchased (1) Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Program Maximum Number of Shares Remaining to be Purchased Under the Program July 1, 2023 to July 31, 2023 219 $ 91.15 — 1,000,000 August 1, 2023 to August 31, 2023 — — — 1,000,000 September 1, 2023 to September 30, 2023 — — — 1,000,000 Total 219 $ 91.15 — (1) Includes 219 shares repurchased to satisfy withholding tax obligations due upon the vesting of stock-based awards.
On August 23, 2022, 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 October 1, 2022 and ending on September 30, 2023.
Issuer Purchases of Equity Securities On August 30, 2023, 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 October 1, 2023 and ending on September 30, 2024.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Our common stock is listed on The NASDAQ Stock Market LLC (“NASDAQ”) under the symbol ‘SNEX’. Our common stock trades on the NASDAQ Global Select Market. As of September 30, 2022, there were approximately 451 registered holders of record of our common stock.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Market Information Our common stock is listed on The NASDAQ Stock Market LLC (“NASDAQ”) under the symbol ‘SNEX’. Our common stock trades on the NASDAQ Global Select Market.
The payment of cash dividends in the future is subject to the discretion of our Board of Directors and will depend on our earnings, financial condition, capital requirements, contractual restrictions and other relevant factors.
Dividends We have never declared any cash dividends on our common stock, and do not currently have any plans to pay dividends on our common stock. The payment of cash dividends in the future is subject to the discretion of our Board of Directors and will depend on our earnings, financial condition, capital requirements, contractual restrictions and other relevant factors.
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.
This authorization replaced the previous authorization to purchase up to 1.0 million shares during fiscal 2023. 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.
Removed
The high and low sales prices per share of our common stock for each full quarterly period during fiscal 2022 and 2021 were as follows: Price Range High Low 2022: Fourth Quarter $ 98.13 $ 74.20 Third Quarter $ 81.05 $ 67.02 Second Quarter $ 77.50 $ 60.76 First Quarter $ 72.34 $ 52.31 2021: Fourth Quarter $ 70.00 $ 60.72 Third Quarter $ 70.47 $ 58.26 Second Quarter $ 66.87 $ 53.51 First Quarter $ 65.02 $ 49.26 We have never declared any cash dividends on our common stock, and do not currently have any plans to pay dividends on our common stock.
Added
Holders of Record As of September 30, 2023, there were 553 registered holders of record of our common stock. This figure excludes the beneficial holders whose shares may be held of record by brokerage firms and clearing agencies.
Removed
Our credit agreements currently prohibit the payment of cash dividends by us. 30 Table of Contents On 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 October 1, 2021 and ending on September 30, 2022.
Added
Our credit agreements currently prohibit the payment of cash dividends by us. Recent Sales of Unregistered Securities We did not have any sales of unregistered equity securities for the fiscal years ended September 30, 2023, 2022 and 2021.
Added
Securities Authorized for Issuance under Equity Compensation Plans Information relating to compensation plans under which our equity securities are authorized for issuance is set forth in Part III, Item 12 of this Annual Report on Form 10-K. 31 Table of Contents Stock Performance Graph The following graph compares the cumulative total return on the Company’s common stock for the most recent five years with the cumulative return on the S&P 500 Index and the NYSE/Arca Securities Broker/Dealer Index, assuming an initial investment of $100 on September 30, 2018, with all dividends reinvested.
Added
The stock price performance is not intended to forecast or be indicative of future performance. Item 6. Reserved 32 Table of Contents

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

175 edited+54 added−68 removed148 unchanged
Biggest changeFinancial Overview Year Ended September 30, (in millions) 2022 % Change 2021 % Change 2020 Revenues: Sales of physical commodities $ 64,052.6 56% $ 40,961.6 (23)% $ 52,899.2 Principal gains, net 1,145.2 28% 892.0 43% 622.2 Commission and clearing fees 507.9 4% 487.2 21% 403.6 Consulting, management, and account fees 111.3 22% 91.0 9% 83.7 Interest income 219.0 114% 102.4 (22)% 130.9 Total revenues 66,036.0 55% 42,534.2 (21)% 54,139.6 Cost of sales of physical commodities 63,928.6 56% 40,861.1 (23)% 52,831.3 Operating revenues 2,107.4 26% 1,673.1 28% 1,308.3 Transaction-based clearing expenses 291.2 7% 271.7 22% 222.5 Introducing broker commissions 160.1 —% 160.5 41% 113.8 Interest expense 135.5 173% 49.6 (38)% 80.4 Interest expense on corporate funding 44.7 8% 41.3 75% 23.6 Net operating revenues 1,475.9 28% 1,150.0 32% 868.0 Compensation and benefits 794.8 17% 679.1 31% 518.7 Bad debts, net of recoveries and impairments 15.8 52% 10.4 (44)% 18.7 Other expenses 394.5 27% 309.8 51% 205.8 Total compensation and other expenses 1,205.1 21% 999.3 34% 743.2 Gain on acquisitions and other gains, net 6.4 88% 3.4 (96)% 81.9 Income before tax 277.2 80% 154.1 (25)% 206.7 Income tax expense 70.1 85% 37.8 2% 37.1 Net income $ 207.1 78% $ 116.3 (31)% $ 169.6 Return on average stockholders’ equity 21.0% 13.9% 24.9% 33 Table of Contents The tables below present a disaggregation of consolidated operating revenues and select operating data and metrics used by management in evaluating our performance, for the periods indicated: Year Ended September 30, 2022 % Change 2021 % Change 2020 Operating Revenues (in millions): Listed derivatives $ 430.5 11% $ 387.6 18% $ 328.5 OTC derivatives 208.3 45% 143.4 29% 111.2 Securities 610.4 14% 533.6 16% 458.3 FX / Contracts for difference (“CFD”) contracts (1) 339.3 40% 242.0 262% 66.9 Global payments 167.8 25% 133.8 17% 114.6 Physical contracts 194.3 27% 152.6 25% 122.4 Interest / fees earned on client balances 89.3 243% 26.0 (39)% 42.7 Other 82.7 19% 69.5 2% 68.4 Corporate Unallocated 7.8 359% 1.7 (88)% 14.6 Eliminations (23.0) 35% (17.1) (11)% (19.3) $ 2,107.4 26% $ 1,673.1 28% $ 1,308.3 (1) Operating revenues from FX / CFD contracts for the year ended September 30, 2020 included 43 trading days of Gain activity from the period post-acquisition of Gain, which was acquired effective August 1, 2020.
Biggest changeFinancial Overview Year Ended September 30, (in millions) 2023 % Change 2022 % Change 2021 Revenues: Sales of physical commodities $ 58,131.2 (9)% $ 64,052.6 56% $ 40,961.6 Principal gains, net 1,079.9 (6)% 1,145.2 28% 892.0 Commission and clearing fees 498.4 (2)% 507.9 4% 487.2 Consulting, management, and account fees 159.0 43% 111.3 22% 91.0 Interest income 987.6 351% 219.0 114% 102.4 Total revenues 60,856.1 (8)% 66,036.0 55% 42,534.2 Cost of sales of physical commodities 57,942.0 (9)% 63,928.6 56% 40,861.1 Operating revenues 2,914.1 38% 2,107.4 26% 1,673.1 Transaction-based clearing expenses 271.8 (7)% 291.2 7% 271.7 Introducing broker commissions 161.6 1% 160.1 —% 160.5 Interest expense 802.2 492% 135.5 173% 49.6 Interest expense on corporate funding 57.5 29% 44.7 8% 41.3 Net operating revenues 1,621.0 10% 1,475.9 28% 1,150.0 Compensation and benefits 868.6 9% 794.8 17% 679.1 Bad debts, net of recoveries 16.5 4% 15.8 52% 10.4 Other expenses 438.3 11% 394.5 27% 309.8 Total compensation and other expenses 1,323.4 10% 1,205.1 21% 999.3 Gain on acquisitions and other gains, net 25.4 297% 6.4 88% 3.4 Income before tax 323.0 17% 277.2 80% 154.1 Income tax expense 84.5 21% 70.1 85% 37.8 Net income $ 238.5 15% $ 207.1 78% $ 116.3 Return on average stockholders’ equity 19.5% 21.0% 13.9% 35 Table of Contents The tables below present 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.
Operating Revenues Year Ended September 30, 2022 Compared to Year Ended September 30, 2021 Operating revenues increased $434.3 million, or 26%, to $2,107.4 million in the year ended September 30, 2022 compared to $1,673.1 million in the year ended September 30, 2021. The table above displays operating revenues disaggregated across the key products we provide to our clients.
Year Ended September 30, 2022 Compared to Year Ended September 30, 2021 Operating revenues increased $434.3 million, or 26%, to $2,107.4 million in the year ended September 30, 2022 compared to $1,673.1 million in the year ended September 30, 2021. The table above displays operating revenues disaggregated across the key products we provide to our clients.
StoneX Financial Inc. is also subject to the Rule 15c3-3 of the Securities Exchange Act of 1934, as amended (“Customer Protection Rule”).
StoneX Financial Inc. is also subject to Rule 15c3-3 of the Securities Exchange Act of 1934, as amended (“Customer Protection Rule”).
ASU 2021-08 requires an acquirer in a business combination to recognize and measure contract assets and contract liabilities from acquired contracts using the revenue recognition guidance under Accounting Standards Codification Topic 606, Revenue from Contacts with Customers, in order recognize contract liabilities in alignment with the definition of performance obligations.
ASU 2021-08 requires an acquirer in a business combination to recognize and measure contract assets and contract liabilities from acquired contracts using the revenue recognition guidance under Accounting Standards Codification Topic 606, Revenue from Contacts with Customers, in order to recognize contract liabilities in alignment with the definition of performance obligations.
Cash Flows We include client cash and securities that meet the short term requirement for cash classification to be segregated for regulatory purposes in our consolidated cash flow statements. We hold a significant amount of U.S. Treasury obligations which represent investment of client funds or client-owned investments pledged in lieu of cash margin. U.S.
Cash Flows We include client cash and securities that meet the short term requirement for cash classification to be segregated for regulatory purposes in our consolidated statements of cash flows. We hold a significant amount of U.S. Treasury obligations which represent investment of client funds or client-owned investments pledged in lieu of cash margin. U.S.
Fixed compensation and benefits increased modestly during the year ended September 30, 2022, principally due to increased headcount, partially offset by lower severance costs. During the year ended September 30, 2022, severance costs were $0.9 million. During the year ended September 30, 2021, severance costs were $3.5 million, principally due to the departure of certain senior officers.
Fixed compensation and benefits increased modestly during the year ended September 30, 2022, principally due to increased headcount, partially offset by lower severance costs. During the year ended September 30, 2022, severance costs were $0.9 million. During the year ended September 30, 2021, severance costs were $3.5 million, principally due to the departure of certain corporate senior officers.
Compensation and Benefits: Year Ended September 30, (in millions) 2022 2021 $ Change % Change Compensation and benefits: Variable compensation and benefits Front office $ 410.4 $ 333.5 $ 76.9 23 % Administrative, executive, and centralized and local operations 67.7 44.2 23.5 53 % Total variable compensation and benefits 478.1 377.7 100.4 27 % Variable compensation and benefits as a percentage of net operating revenues 32 % 33 % Fixed compensation and benefits: Non-variable salaries 225.8 204.7 21.1 10 % Employee benefits and other compensation, excluding share-based compensation 73.1 82.8 (9.7) (12) % Share-based compensation 17.8 13.9 3.9 28 % Total fixed compensation and benefits 316.7 301.4 15.3 5 % Total compensation and benefits $ 794.8 $ 679.1 $ 115.7 17 % Total compensation and benefits as a percentage of operating revenues 38 % 41 % Number of employees, end of period 3,615 3,242 373 12 % Non-variable salaries increased principally due to the increase in headcount resulting from expanding capabilities among our business lines, as well as the growth in our operational and overhead departments supporting our business growth.
Compensation and Benefits: Year Ended September 30, (in millions) 2022 2021 $ Change % Change Compensation and benefits: Variable compensation and benefits Front office $ 410.4 $ 333.5 $ 76.9 23 % Administrative, executive, and centralized and local operations 67.7 44.2 23.5 53 % Total variable compensation and benefits 478.1 377.7 100.4 27 % Variable compensation and benefits as a percentage of net operating revenues 32 % 33 % Fixed compensation and benefits: Non-variable salaries 225.8 204.7 21.1 10 % Employee benefits and other compensation, excluding share-based compensation 73.1 82.8 (9.7) (12) % Share-based compensation 17.8 13.9 3.9 28 % Total fixed compensation and benefits 316.7 301.4 15.3 5 % Total compensation and benefits $ 794.8 $ 679.1 $ 115.7 17 % Total compensation and benefits as a percentage of operating revenues 38 % 41 % Number of employees, end of period 3,615 3,242 373 12 % Non-variable salaries increased principally due to increased headcount resulting from expanded capabilities among our business lines, as well as the growth in our operational and overhead departments supporting our business growth.
Introducing broker commissions Year Ended September 30, 2022 2021 $ Change % Change Introducing broker commissions $ 160.1 $ 160.5 $ (0.4) — % Percentage of operating revenues 8 % 10 % The modest decrease in introducing broker commissions is principally due to lower costs within our Financial Ag & Energy and Retail Forex businesses, partially offset by increased activity in our Exchange-Traded Futures & Options, LME Metals, Physical Ag & Energy and Global Payments businesses.
Introducing broker commissions Year Ended September 30, 2022 2021 $ Change % Change Introducing broker commissions $ 160.1 $ 160.5 $ (0.4) — % Percentage of operating revenues 8 % 10 % The modest decrease in introducing broker commissions was principally due to lower costs within our Financial Ag & Energy and Retail Forex businesses, partially offset by increased activity in our Exchange-Traded Futures & Options, LME Metals, Physical Ag & Energy and Global Payments businesses.
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. Total Segment Results The following table presents summary information concerning all of our business segments on a combined basis, excluding unallocated overhead, for the periods indicated.
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. 45 Table of Contents Total Segment Results The following table presents summary information concerning all of our business segments on a combined basis, excluding unallocated overhead, for the periods indicated.
Segment income increased $169.5 million, or 33%, to $675.7 million in the year ended September 30, 2022 compared to $506.2 million in the year ended September 30, 2021 .
Segment income increased $169.5 million, or 33%, to $675.7 million in the fiscal year ended September 30, 2022 compared to $506.2 million in the year ended September 30, 2021 .
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.
Commercial Institutional Retail Global Payments Primary Activities: Primary Activities: Primary Activities: Primary Activities: Financial Ag & Energy Equity Capital Markets Retail Forex Global Payments LME Metals Debt Capital Markets Retail Precious Metals Payment Technology Services Physical Ag & Energy FX Prime Brokerage Independent Wealth Management Precious Metals 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.
We also may be exposed to increased counterparty default, liquidity and credit risks with respect to our client accounts, which means if our clients experience losses in excess of the funds they have deposited with us, we may not be able to recover the negative client equity from our clients.
We also may be exposed to increased counterparty default, liquidity and credit risks with respect to our client accounts, which means if our clients experience losses in excess of the funds they have deposited with us, we may not be able to recover the negative balance from our clients.
Today, we provide an institutional-grade financial services ecosystem, connecting our clients to 40 derivatives exchanges, 185 foreign exchange markets, most global securities exchanges and over 18,000 over-the-counter markets via our networks of highly integrated digital platforms and experienced professionals.
Today, we provide an institutional-grade financial services ecosystem, connecting our clients to 40 derivatives exchanges, 180 foreign exchange markets, most global securities exchanges and over 18,000 over-the-counter markets via our networks of highly integrated digital platforms and experienced professionals.
As of September 30, 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.
As of September 30, 2023, 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.
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. Our subsidiaries are in compliance with all of their capital regulatory requirements as of September 30, 2022.
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. Our subsidiaries are in compliance with all of their capital regulatory requirements as of September 30, 2023.
We comply with the minimum funding requirements, and accordingly contributed $0.1 million to our defined benefit pension plans during the year ended September 30, 2022. During the year ending September 30, 2023, we anticipate making future benefit payments of $2.1 million related to the defined benefit plans.
We comply with the minimum funding requirements, and accordingly contributed $0.1 million to our defined benefit pension plans during the year ended September 30, 2023. During the year ending September 30, 2024, we anticipate making future benefit payments of $2.1 million related to the defined benefit plans.
We will incur losses if the fair value of the Financial instruments sold, not yet purchased , increases subsequent to September 30, 2022, which might be partially or wholly offset by gains in the value of assets held as of September 30, 2022.
We will incur losses if the fair value of the Financial instruments sold, not yet purchased , increases subsequent to September 30, 2023, which might be partially or wholly offset by gains in the value of assets held as of September 30, 2023.
During the year ended September 30, 2022, severance costs were $2.6 million. During the year ended September 30, 2021, severance costs were $7.7 million, principally due to the departure of certain senior officers. Share-based compensation includes stock option and restricted stock expense.
During the year ended September 30, 2022, severance costs were $2.6 million. During the year ended September 30, 2021, severance costs were $7.7 million, principally due to the departure of certain senior officers. Share-based compensation included stock option and restricted stock expense.
Failure to comply with any such covenants could result in the debt becoming payable on demand. As of September 30, 2022, we and our subsidiaries are in compliance with all of our financial covenants under the outstanding facilities.
Failure to comply with any such covenants could result in the debt becoming payable on demand. As of September 30, 2023, we and our subsidiaries are in compliance with all of our financial covenants under the outstanding facilities.
Where available, we price from independent sources such as listed market prices, third-party pricing services, or broker or dealer price quotations. In limited cases, we use fair values derived from pricing models that consider current market and contractual prices for the underlying financial instruments or commodities, as well as time value and yield curve or volatility factors underlying the positions.
Where available, we price from independent sources such as listed market prices, third-party pricing services, or broker dealer price quotations. We use fair values derived from pricing models that consider current market and contractual prices for the underlying financial instruments or commodities, as well as time value and yield curve or volatility factors underlying the positions.
This increase was principally a result of a 25% increase in securities ADV driven by increased client activity in fixed income markets, which was partially offset by a 5% decline in RPM as a result of lower spreads in equity products.
This increase was principally a result of a 25% increase in securities ADV driven by increased client activity in fixed income markets, which was partially offset by a 15% decline in RPM as a result of lower spreads in equity products.
Client and Counterparty Credit and Liquidity Risk Our operations expose us to credit risk of default of our clients and counterparties. The risk includes liquidity risk to the extent our clients or counterparties are unable to make timely payment of margin or other credit support.
Client and Counterparty Credit and Liquidity Risk Our operations expose us to credit risk related to our clients and counterparties. The risk includes liquidity risk to the extent our clients or counterparties are unable to make timely payment of margin or other credit support.
See Segment Information for a listing of business activities performed within our reportable segments. 31 Table of Contents StoneX Group Inc. and its trade name "StoneX" carry forward the foundation established by Saul Stone in 1924 to today's modern financial services firm.
See Segment Information for a listing of business activities performed within our reportable segments. StoneX Group Inc. and its trade name "StoneX" carry forward the foundation established by Saul Stone in 1924 to today's modern financial services firm.
Generally, these exposures to exchanges are subject to netting of open positions and collateral, while exposures to clients are subject to 60 Table of Contents 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.
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.
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 control the risks associated with these transactions by requiring clients to maintain margin deposits in compliance with both 61 Table of Contents 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.
Rising 61 Table of Contents interest rates are generally favorable for us, to the extent that inflation has other adverse effects on the financial markets and on the value of the financial instruments held in inventory, it may adversely affect our financial position and results of operations. Critical Accounting Policies Preparing consolidated financial statements in conformity with U.S.
While rising interest rates are generally favorable for us, to the extent that inflation has other adverse effects on the financial markets and on the value of the financial instruments held in inventory, it may adversely affect our financial position and results of operations. Critical Accounting Policies Preparing consolidated financial statements in conformity with U.S.
This increase was principally driven by 44 Table of Contents a 9% increase in the average rate per contract as a result of wider spreads in LME commodity markets which was partially offset by a 2% decrease in contract volumes as a result of decline in agricultural and soft commodity client volumes.
This increase was principally driven by a 9% increase in the average rate per contract as a result of wider spreads in LME commodity markets which was partially offset by a 2% decrease in contract volumes as a result of decline in agricultural and soft commodity client volumes.
We do not expect any other recently issued accounting pronouncements to have a significant effect on our financial statements. 63 Table of Contents
We do not expect any other recently issued accounting pronouncements to have a significant effect on our financial statements. 64 Table of Contents
We provide transparent pricing and offer payments services in more than 185 countries and 140 currencies, which we believe is more than any other payments solutions provider.
We provide transparent pricing and offer payments services in more than 180 countries and 140 currencies, which we believe is more than any other payments solutions provider.
This increase primarily resulted from the increase in net operating revenues, partially offset by a $8.6 million increase in non-variable direct expenses versus the prior year period, which includes a $4.2 52 Table of Contents million increase in fixed compensation and benefits, a $1.2 million increase in travel and business development and a $0.7 million increase in non-trading technology and support.
This increase primarily resulted from the increase in net operating revenues, partially offset by a $8.6 million increase in non-variable direct expenses versus the prior year period, which includes a $4.2 million increase in fixed compensation and benefits, a $1.2 million increase in travel and business development and a $0.7 million increase in non-trading technology and support.
OTC clients are required to post sufficient collateral to meet margin requirements based on value-at-risk models as 55 Table of Contents well as variation margin requirements based on the price movement of the commodity or security in which they transact.
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.
Operating revenues are calculated as total revenues less cost of sales of physical commodities. Net operating revenue is calculated as operating revenue less transaction-based clearing expenses, introducing broker commissions and interest expense. 42 Table of Contents Net contribution is calculated as net operating revenues less variable compensation.
Operating revenues are calculated as total revenues less cost of sales of physical commodities. Net operating revenue is calculated as operating revenue less transaction-based clearing expenses, introducing broker commissions and interest expense. Net contribution is calculated as net operating revenues less variable compensation.
The Senior Secured Notes are fully and unconditionally guaranteed, jointly and severally, on a senior second lien secured basis, by certain subsidiaries of the Company that guarantee the Company’s senior committed credit facility and by Gain and certain of its domestic subsidiaries. The Notes will mature on June 15, 2025.
The Senior Secured Notes are fully and unconditionally guaranteed, jointly and severally, on a senior second lien secured basis, by certain subsidiaries of the Company that guarantee the Company’s senior committed credit facility and certain of its domestic subsidiaries. 58 Table of Contents The Notes will mature on June 15, 2025.
For foreign currency transactions completed during each reporting period, the foreign exchange rate in effect at the time of the transaction is used before translation into U.S. dollar equivalent for consolidated reporting. Judgment and Uncertainties At each period end, we, using professional judgment and industry expertise, select fair values for financial instruments.
For foreign currency transactions completed during each reporting period, the relevant exchange rate at the time is used before translation into U.S. dollar equivalent for consolidated reporting. Judgment and Uncertainties At each period end, using professional judgment and industry expertise, we select fair values for financial instruments.
All assets that are not client and counterparty deposit financed 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. As of September 30, 2022, we had deferred tax assets totaling $52.0 million.
All assets that are not client and counterparty deposit financed 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. As of September 30, 2023, we had deferred tax assets totaling $45.4 million.
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 the commodity exchanges prior to collecting margin funds from their clients.
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. Certain of our subsidiaries occasionally utilize their margin line credit facilities, on a short-term basis, to meet intraday settlements with the commodity exchanges prior to collecting margin funds from their clients.
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 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 clients, suppliers or business customers.
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 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 public health emergencies, such as the recent COVID-19 pandemic on our business, operations, results of operations, financial condition, workforce or the operations or decisions of our clients, suppliers or business customers.
Accordingly, no contingent liability for these arrangements has been recorded in the Consolidated Balance Sheets as of September 30, 2022 and 2021. Effects of Inflation Increases in our expenses, such as compensation and benefits, transaction-based clearing expenses, occupancy and equipment rental, may result from inflation, while we may not be readily recoverable from increasing the prices of our services.
Accordingly, no contingent liability for these arrangements has been recorded in the Consolidated Balance Sheets as of September 30, 2023 and 2022. 62 Table of Contents Effects of Inflation Increases in our expenses, such as compensation and benefits, transaction-based clearing expenses, occupancy and equipment rental, may result from inflation, which may not be readily recoverable from increasing the prices of our services.
Employee benefits and other compensation, excluding share-based compensation, decreased principally due to an increase in employee-elected deferred incentive, which is exchange for restricted stock that will be amortized over a thirty-six month period following the grant date and lower severance costs, partially offset by higher payroll, benefits, and retirement costs from the increased headcount.
Employee benefits and other compensation, excluding share-based compensation, decreased principally due to increased employee-elected deferred incentive, which was exchanged for restricted stock that is amortized over a thirty-six month period following the grant date and lower severance costs, partially offset by higher payroll, benefits, and retirement costs from the increased headcount.
In some cases, even though the value of a security is derived from an independent market price, or broker or dealer quote, certain assumptions may be required to determine the fair value.
In some cases, even though the value of a security is derived from an independent market price, or broker or dealer quote, we may need to make certain assumptions to determine the fair value.
We seek to make our non-interest expenses variable to the greatest extent possible, and to keep our fixed costs as low as possible. During the year ended September 30, 2022, non-variable expenses, excluding bad debts, net of recoveries, increased $100.0 million, or 16%, compared to the year ended September 30, 2021.
We seek to make our non-interest expenses variable to the greatest extent possible, and to keep our fixed costs as low as possible. During the fiscal year ended September 30, 2023, non-variable expenses, excluding bad debts, net of recoveries, increased $112.5 million, or 16%, compared to the fiscal year ended September 30, 2022.
The valuation allowances as of September 30, 2022 and 2021 were primarily related to U.S. state and local, and foreign net operating loss carryforwards and foreign tax credits acquired through the merger with Gain that, in the judgment of management, are not more likely than not to be realized.
The valuation allowances as of September 30, 2023 and 2022 were primarily related to U.S. state and local, and foreign net operating loss carryforwards and foreign tax credits that, in the judgment of management, are not more likely than not to be realized.
We repatriated $29.7 million and $300.6 million for the fiscal year ended September 30, 2022 and 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.
We repatriated $35.5 million and $29.7 million for the fiscal years ended September 30, 2023 and 2022, 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.
We continuously evaluate opportunities to expand our business. Investing activities include $49.5 million in capital expenditures for property and equipment during the year ended September 30, 2022 compared to $62.1 million during the year ended September 30, 2021 and $16.6 million during the year ended September 30, 2020.
We continuously evaluate opportunities to expand our business. Investing activities include $46.9 million in capital expenditures for property and equipment during the fiscal year ended September 30, 2023 compared to $49.5 million during the fiscal year ended September 30, 2022 and $62.1 million during the fiscal year ended September 30, 2021.
The decline in the percentage of operating revenues is principally due to the significant increase in interest income.
The decline in the percentage of operating revenues was principally due to the increase in interest income.
The decline in the percentage of operating revenues is principally due to the significant increase in interest income.
The decline in the percentage of operating revenues was principally due to the increase in interest income.
We record these obligations in the consolidated financial statements as of September 30, 2022 and 2021, at fair value of the related financial instruments, totaling $2,469.6 million and $1,771.2 million, respectively.
We record these obligations in the consolidated financial statements as of September 30, 2023 and 2022, at fair value of the related financial instruments, totaling $3,085.6 million and $2,469.6 million, respectively.
Treasury securities that have original or acquired maturities that are greater than 90 days. Our cash, segregated cash, cash equivalents, and segregated cash equivalents decreased from $6,509.5 million as of September 30, 2021 to $6,285.1 million as of September 30, 2022, a net decrease of $224.4 million.
Treasury securities that have original or acquired maturities that are greater than 90 days. Our cash, segregated cash, cash equivalents, and segregated cash equivalents decreased from $6,285.1 million as of September 30, 2022 to $6,041.7 million as of September 30, 2023, a net decrease of $243.4 million.
Unpriced contract commitments have been estimated using September 30, 2022 fair values. The purchase commitments for less than one year will be partially offset by corresponding sales commitments of $8,253.9 million . Total contractual obligations exclude defined benefit pension obligations.
Unpriced contract commitments have been estimated using September 30, 2023 fair values. The purchase commitments for less than one year will be partially offset by corresponding sales commitments of $5,689.0 million . Total contractual obligations exclude defined benefit pension obligations.
Our total assets as of September 30, 2022 and 2021, were $19.9 billion and $18.8 billion, respectively. Our operating activities generate or utilize cash as a result of net income or loss earned or incurred during each 56 Table of Contents period and fluctuations in our assets and liabilities.
Our total assets as of September 30, 2023 and 2022, were $21.9 billion and $19.9 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 totals of $2,469.6 million and $1,771.2 million include a net liability of $384.0 million and $368.5 million for derivatives, based on their fair value as of September 30, 2022 and 2021, respectively. We do not anticipate non-performance by counterparties in the above situations.
The totals of $3,085.6 million and $2,469.6 million include a net liability of $288.3 million and $384.0 million for derivatives, based on their fair value as of September 30, 2023 and 2022, respectively. We do not anticipate non-performance by counterparties in the above situations.
The ultimate outcome of remaining arbitrations cannot presently be determined. Depending on future collections and the outcomes of arbitration proceedings, any provisions for bad debts and actual losses may or may not be material to our financial results.
Depending on future collections and the outcomes of arbitration proceedings, any provisions for bad debts and actual losses may or may not be material to our financial results.
Our businesses are supported by our global infrastructure of regulated operating subsidiaries, our advanced technology platforms and our team of more than 3,600 employees as of September 30, 2022.
Our businesses are supported by our global infrastructure of regulated operating subsidiaries, our advanced technology platforms and our team of more than 4,000 employees as of September 30, 2023.
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.
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.
The valuation allowance for deferred tax assets as of September 30, 2022 and 2021 was $15.8 million and $15.0 million, respectively.
The valuation allowance for deferred tax assets as of September 30, 2023 and 2022 was $12.4 million and $15.8 million, respectively.
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. 54 Table of Contents StoneX Markets LLC is a CFTC provisionally registered swap dealer, whose business is overseen by the NFA.
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.
Year Ended September 30, (in millions) 2022 % Change 2021 % Change 2020 Compensation and benefits: Variable compensation and benefits $ 59.5 58% $ 37.6 (7)% $ 40.5 Fixed compensation and benefits 119.2 —% 119.1 37% 86.8 178.7 14% 156.7 23% 127.3 Other expenses: Occupancy and equipment rental 35.7 8% 33.1 41% 23.4 Non-trading technology and support 38.3 20% 31.8 43% 22.2 Professional fees 26.1 13% 23.0 5% 22.0 Depreciation and amortization 21.7 14% 19.0 15% 16.5 Communications 5.5 (15)% 6.5 5% 6.2 Selling and marketing 5.8 241% 1.7 (59)% 4.1 Trading systems and market information 4.6 10% 4.2 62% 2.6 Travel and business development 4.0 208% 1.3 (43)% 2.3 Other 18.6 (21)% 23.4 22% 19.2 160.3 11% 144.0 22% 118.5 Total compensation and other expenses $ 339.0 13% $ 300.7 22% $ 245.8 53 Table of Contents Year Ended September 30, 2022 Compared to Year Ended September 30, 2021 Total unallocated costs and other expenses increased $38.3 million, or 13%, to $339.0 million in the year ended September 30, 2022 compared to $300.7 million in the year ended September 30, 2021.
Year Ended September 30, (in millions) 2023 % Change 2022 % Change 2021 Compensation and benefits: Variable compensation and benefits $ 67.6 14% $ 59.5 58% $ 37.6 Fixed compensation and benefits 156.4 31% 119.2 —% 119.1 224.0 25% 178.7 14% 156.7 Other expenses: Occupancy and equipment rental 39.4 10% 35.7 8% 33.1 Non-trading technology and support 43.1 13% 38.3 20% 31.8 Professional fees 26.3 1% 26.1 13% 23.0 Depreciation and amortization 22.6 4% 21.7 14% 19.0 Communications 6.6 20% 5.5 (15)% 6.5 Selling and marketing 4.4 (24)% 5.8 241% 1.7 Trading systems and market information 7.7 67% 4.6 10% 4.2 Travel and business development 5.5 38% 4.0 208% 1.3 Other 21.3 15% 18.6 (21)% 23.4 176.9 10% 160.3 11% 144.0 Total compensation and other expenses $ 400.9 18% $ 339.0 13% $ 300.7 Year Ended September 30, 2023 Compared to Year Ended September 30, 2022 Total unallocated costs and other expenses increased $61.9 million, or 18%, to $400.9 million in the fiscal year ended September 30, 2023 compared to $339.0 million in the fiscal year ended September 30, 2022.
OptionSellers In November 2018, balances in approximately 300 accounts of the FCM division of our wholly owned subsidiary, StoneX Financial Inc., declined below required maintenance margin levels and into deficit balances, 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 In November 2018, balances in approximately 300 accounts of the FCM division of our wholly owned subsidiary, StoneX Financial Inc., declined below required maintenance margin levels and into deficit balances. All positions in these accounts, which were managed by OptionSellers.com Inc.
As of September 30, 2022, we had total equity of $1,070.1 million, outstanding loans under revolving credit facilities of $485.1 million and $339.1 million outstanding on our senior secured notes, net of deferred financing costs. A substantial portion of our assets are liquid.
As of September 30, 2023, we had total equity of $1,379.1 million, outstanding loans under revolving credit and other facilities of $341.0 million and $342.1 million outstanding on our senior secured notes, net of deferred financing costs. A substantial portion of our assets are liquid.
Year Ended September 30, (in millions) 2022 % Change 2021 % Change 2020 Compensation and benefits: Variable compensation and benefits $ 478.1 27% $ 377.7 27% $ 296.8 Fixed compensation and benefits 316.7 5% 301.4 36% 221.9 794.8 17% 679.1 31% 518.7 Other expenses: Trading systems and market information 66.2 13% 58.8 27% 46.3 Professional fees 54.3 33% 40.9 35% 30.2 Non-trading technology and support 52.4 14% 46.0 62% 28.4 Occupancy and equipment rental 36.1 6% 34.2 46% 23.5 Selling and marketing 55.3 66% 33.3 173% 12.2 Travel and business development 16.9 276% 4.5 (49)% 8.9 Communications 8.3 (11)% 9.3 33% 7.0 Depreciation and amortization 44.4 22% 36.5 85% 19.7 Bad debts, net of recoveries and impairment 15.8 52% 10.4 (44)% 18.7 Other 60.6 31% 46.3 56% 29.6 410.3 28% 320.2 43% 224.5 Total compensation and other expenses $ 1,205.1 21% $ 999.3 34% $ 743.2 38 Table of Contents Year Ended September 30, 2022 Compared to Year Ended September 30, 2021 Compensation and Other Expenses: Compensation and other expenses increased $205.8 million, or 21%, to $1,205.1 million in the year ended September 30, 2022 compared to $999.3 million in the year ended September 30, 2021.
Year Ended September 30, (in millions) 2023 % Change 2022 % Change 2021 Compensation and benefits: Variable compensation and benefits $ 483.2 1% $ 478.1 27% $ 377.7 Fixed compensation and benefits 385.4 22% 316.7 5% 301.4 868.6 9% 794.8 17% 679.1 Other expenses: Trading systems and market information 74.0 12% 66.2 13% 58.8 Professional fees 57.0 5% 54.3 33% 40.9 Non-trading technology and support 61.6 18% 52.4 14% 46.0 Occupancy and equipment rental 40.4 12% 36.1 6% 34.2 Selling and marketing 54.0 (2)% 55.3 66% 33.3 Travel and business development 24.8 47% 16.9 276% 4.5 Communications 9.1 10% 8.3 (11)% 9.3 Depreciation and amortization 51.0 15% 44.4 22% 36.5 Bad debts, net of recoveries 16.5 4% 15.8 52% 10.4 Other 66.4 10% 60.6 31% 46.3 454.8 11% 410.3 28% 320.2 Total compensation and other expenses $ 1,323.4 10% $ 1,205.1 21% $ 999.3 40 Table of Contents Year Ended September 30, 2023 Compared to Year Ended September 30, 2022 Compensation and Other Expenses: Compensation and other expenses increased $118.3 million, or 10%, to $1,323.4 million in the fiscal year ended September 30, 2023 compared to $1,205.1 million in the fiscal year ended September 30, 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.
Aggregate BHC capital and the related net capital requirement may fluctuate on a daily basis. 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.
Interest and Transactional Expenses Year Ended September 30, 2022 Compared to Year Ended September 30, 2021 Transaction-based clearing expenses Year Ended September 30, 2022 2021 $ Change % Change Transaction-based clearing expenses $ 291.2 $ 271.7 $ 19.5 7 % Percentage of operating revenues 14 % 16 % The increase in expense is principally due to higher 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 our Debt Capital Markets, Global Payments, and Retail Forex businesses due to increases in average daily volumes.
The increase in interest expense attributable to corporate funding was principally due to higher short-term interest rates on our revolving credit facility as well as an increase in average borrowings. 38 Table of Contents Year Ended September 30, 2022 Compared to Year Ended September 30, 2021 Transaction-based clearing expenses Year Ended September 30, 2022 2021 $ Change % Change Transaction-based clearing expenses $ 291.2 $ 271.7 $ 19.5 7 % Percentage of operating revenues 14 % 16 % The increase in expense was principally due to higher 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 our Debt Capital Markets, Global Payments, and Retail Forex businesses due to increased average daily volumes.
However, we believe that the likelihood of a material adverse outcome is remote, and 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.
However, we believe that the likelihood of a material adverse outcome is remote, and 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. Additional information on this matter can be found in Note 13 of the Consolidated Financial Statements.
A substantial amount of our revenues derive from Commission and clearing fees . These revenue types involve less complexity than Principal gains, net would, as, generally, we are an agent in the underlying transactions.
We record fee and interest income on the accrual basis and dividend income is recognized on the ex-dividend date. A substantial amount of our revenues derive from Commission and clearing fees . These revenue types involve less complexity than Principal gains, net would, as, generally, we are an agent in the underlying transactions.
Year Ended September 30, (in millions) 2022 % Change 2021 % Change 2020 Sales of physical commodities $ 889.9 (42)% $ 1,541.3 405% $ 305.3 Principal gains, net 307.4 45% 212.7 403% 42.3 Commission and clearing fees 50.8 (14)% 58.9 18% 49.8 Consulting, management, and account fees 51.6 13% 45.5 32% 34.6 Interest income 4.5 200% 1.5 114% 0.7 Total revenues 1,304.2 (30)% 1,859.9 330% 432.7 Cost of physical commodities sold 877.5 (42)% 1,511.9 417% 292.7 Operating revenues 426.7 23% 348.0 149% 140.0 Transaction-based clearing expenses 26.2 2% 25.7 302% 6.4 Introducing broker commissions 95.6 (3)% 98.2 42% 69.0 Interest expense 2.0 18% 1.7 113% 0.8 Net operating revenues 302.9 36% 222.4 249% 63.8 Variable compensation and benefits 22.6 26% 18.0 260% 5.0 Net contribution 280.3 37% 204.4 248% 58.8 Fixed compensation and benefits 55.7 8% 51.6 406% 10.2 Other fixed expenses 113.3 35% 83.9 415% 16.3 Bad debts, net of recoveries 2.3 109% 1.1 83% 0.6 Total non-variable direct expenses 171.3 25% 136.6 404% 27.1 Other gain 6.4 n/m — —% — Segment income $ 115.4 70% $ 67.8 114% $ 31.7 The tables below reflect a disaggregation of operating revenues and select operating data and metrics used by management in evaluating performance of our Retail segment for the periods indicated.
Year Ended September 30, (in millions) 2023 % Change 2022 % Change 2021 Sales of physical commodities $ 571.3 (36)% $ 889.9 (42)% $ 1,541.3 Principal gains, net 186.4 (39)% 307.4 45% 212.7 Commission and clearing fees 46.3 (9)% 50.8 (14)% 58.9 Consulting, management, and account fees 53.6 4% 51.6 13% 45.5 Interest income 30.9 587% 4.5 200% 1.5 Total revenues 888.5 (32)% 1,304.2 (30)% 1,859.9 Cost of physical commodities sold 555.5 (37)% 877.5 (42)% 1,511.9 Operating revenues 333.0 (22)% 426.7 23% 348.0 Transaction-based clearing expenses 16.2 (38)% 26.2 2% 25.7 Introducing broker commissions 83.8 (12)% 95.6 (3)% 98.2 Interest expense 5.7 185% 2.0 18% 1.7 Net operating revenues 227.3 (25)% 302.9 36% 222.4 Variable compensation and benefits 14.6 (35)% 22.6 26% 18.0 Net contribution 212.7 (24)% 280.3 37% 204.4 Fixed compensation and benefits 47.5 (15)% 55.7 8% 51.6 Other fixed expenses 117.1 3% 113.3 35% 83.9 Bad debts, net of recoveries 2.3 —% 2.3 109% 1.1 Total non-variable direct expenses 166.9 (3)% 171.3 25% 136.6 Other gain — (100)% 6.4 n/m — Segment income $ 45.8 (60)% $ 115.4 70% $ 67.8 The tables below reflect a disaggregation of operating revenues and select operating data and metrics used by management in evaluating performance of our Retail segment for the periods indicated.
The increase in non-variable direct expenses, excluding bad debts was primarily related to a $5.2 million increase in fixed compensation and benefits, a $3.9 million increase in trade systems and market information, a $6.2 million increase in professional fees and a $3.0 million increase in travel and business development.
The increase in non-variable direct expenses was primarily related to a $8.4 million increase in fixed compensation and benefits, a $3.8 million increase in trade systems and market information, a $2.4 million increase in non-trading technology and support, a $1.5 million increase in professional fees and a $1.9 million increase in travel and business development.
Year Ended September 30, (in millions) 2022 % of Total 2021 % of Total 2020 % of Total Variable compensation and benefits $ 478.1 29% $ 377.7 26% $ 296.8 27% Transaction-based clearing expenses 291.2 17% 271.7 19% 222.5 21% Introducing broker commissions 160.1 10% 160.5 11% 113.8 11% Total variable expenses 929.4 56% 809.9 56% 633.1 59% Fixed compensation and benefits 316.7 19% 301.4 21% 221.9 20% Other fixed expenses 394.5 24% 309.8 22% 205.8 19% Bad debts, net of recoveries and impairment 15.8 1% 10.4 1% 18.7 2% Total non-variable expenses 727.0 44% 621.6 44% 446.4 41% Total non-interest expenses $ 1,656.4 100% $ 1,431.5 100% $ 1,079.5 100% 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.
Year Ended September 30, (in millions) 2023 % of Total 2022 % of Total 2021 % of Total Variable compensation and benefits $ 483.2 28% $ 478.1 29% $ 377.7 26% Transaction-based clearing expenses 271.8 15% 291.2 17% 271.7 19% Introducing broker commissions 161.6 9% 160.1 10% 160.5 11% Total variable expenses 916.6 52% 929.4 56% 809.9 56% Fixed compensation and benefits 385.4 22% 316.7 19% 301.4 21% Other fixed expenses 438.3 25% 394.5 24% 309.8 22% Bad debts, net of recoveries 16.5 1% 15.8 1% 10.4 1% Total non-variable expenses 840.2 48% 727.0 44% 621.6 44% Total non-interest expenses $ 1,756.8 100% $ 1,656.4 100% $ 1,431.5 100% 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.
The gain on acquisition of $3.3 million in the year ended September 30, 2021 was not taxable and reduced the effective income tax rate 0.5%.
The gain on acquisition of $23.5 million in the fiscal year ended September 30, 2023 was not taxable and reduced the effective income tax rate 1.4%.
Year Ended September 30, (in millions) 2022 % of Operating Revenues 2021 % of Operating Revenues 2020 % of Operating Revenues Sales of physical commodities $ 64,052.6 $ 40,961.6 $ 52,899.2 Principal gains, net 1,150.5 899.0 620.8 Commission and clearing fees 509.6 488.4 405.1 Consulting, management, and account fees 108.5 86.5 79.2 Interest income 230.0 114.1 140.0 Total revenues 66,051.2 42,549.6 54,144.3 Cost of sales of physical commodities 63,928.6 40,861.1 52,831.3 Operating revenues 2,122.6 100% 1,688.5 100% 1,313.0 100% Transaction-based clearing expenses 292.3 14% 270.3 16% 221.0 17% Introducing broker commissions 160.3 8% 161.2 10% 113.6 9% Interest expense 134.6 6% 52.2 3% 85.9 7% Net operating revenues 1,535.4 1,204.8 892.5 Variable direct compensation and benefits 413.5 19% 336.1 20% 253.0 19% Net contribution 1,121.9 868.7 639.5 Fixed compensation and benefits 175.7 162.3 117.7 Other fixed expenses 261.1 189.8 108.0 Bad debts, net of recoveries and impairment 15.8 10.4 18.7 Total non-variable direct expenses 452.6 21% 362.5 21% 244.4 19% Other gain 6.4 — — Segment income $ 675.7 $ 506.2 $ 395.1 Year Ended September 30, 2022 Compared to Year Ended September 30, 2021 Net contribution for all of our business segments increased $253.2 million, or 29%, to $1,121.9 million in the year ended September 30, 2022 compared to $868.7 million in the year ended September 30, 2021 .
Year Ended September 30, (in millions) 2023 % of Operating Revenues 2022 % of Operating Revenues 2021 % of Operating Revenues Sales of physical commodities $ 58,131.2 $ 64,052.6 $ 40,961.6 Principal gains, net 1,077.4 1,150.5 899.0 Commission and clearing fees 500.3 509.6 488.4 Consulting, management, and account fees 155.6 108.5 86.5 Interest income 999.4 230.0 114.1 Total revenues 60,863.9 66,051.2 42,549.6 Cost of sales of physical commodities 57,942.0 63,928.6 40,861.1 Operating revenues 2,921.9 100% 2,122.6 100% 1,688.5 100% Transaction-based clearing expenses 271.6 9% 292.3 14% 270.3 16% Introducing broker commissions 161.6 6% 160.3 8% 161.2 10% Interest expense 804.8 28% 134.6 6% 52.2 3% Net operating revenues 1,683.9 1,535.4 1,204.8 Variable direct compensation and benefits 410.3 14% 413.5 19% 336.1 20% Net contribution 1,273.6 1,121.9 868.7 Fixed compensation and benefits 204.9 175.7 162.3 Other fixed expenses 290.8 261.1 189.8 Bad debts, net of recoveries 16.5 15.8 10.4 Total non-variable direct expenses 512.2 18% 452.6 21% 362.5 21% Other gains 2.1 6.4 — Segment income $ 763.5 $ 675.7 $ 506.2 Year Ended September 30, 2023 Compared to Year Ended September 30, 2022 Net contribution for all of our business segments increased $151.7 million, or 14%, to $1,273.6 million in the fiscal year ended September 30, 2023 compared to $1,121.9 million in the fiscal year ended September 30, 2022 .
In accordance with required disclosure as part of our three-year syndicated revolving loan facility, during the trailing twelve months ended September 30, 2022, interest expense directly attributable to trading activities includes $62.3 million in connection with trading activities conducted as an institutional dealer in fixed income securities, and $23.0 million in connection with securities lending activities.
In accordance with required disclosure as part of our first-lien senior secured syndicated revolving loan facility, during the trailing twelve months ended September 30, 2023, interest expense directly attributable to trading activities includes $556.7 million in connection with trading activities conducted as an institutional dealer in fixed income securities, and $39.4 million in connection with securities lending activities.
We did not repurchase any of our outstanding common stock during the year ended September 30, 2022. 59 Table of Contents On August 23, 2022, our Board of Directors authorized the repurchase of up to 1.0 million shares of our outstanding common stock in open market purchases and private transactions, commencing on October 1, 2022 and ending on September 30, 2023.
On August 30, 2023, our Board of Directors authorized the repurchase of up to 1.0 million shares of our outstanding common stock in open market purchases and private transactions, commencing on October 1, 2023 and ending on September 30, 2024.
Year Ended September 30, (in millions) 2022 % Change 2021 % Change 2020 Revenues: Sales of physical commodities $ — —% $ — —% $ — Principal gains, net 337.2 8% 312.0 14% 273.6 Commission and clearing fees 283.8 15% 246.0 17% 211.1 Consulting, management, and account fees 32.2 79% 18.0 (23)% 23.3 Interest income 178.6 93% 92.4 (20)% 116.1 Total revenues 831.8 24% 668.4 7% 624.1 Cost of sales of physical commodities — —% — —% — Operating revenues 831.8 24% 668.4 7% 624.1 Transaction-based clearing expenses 202.4 10% 184.1 9% 168.7 Introducing broker commissions 31.7 15% 27.5 38% 19.9 Interest expense 114.2 205% 37.4 (48)% 71.7 Net operating revenues 483.5 15% 419.4 15% 363.8 Variable compensation and benefits 188.4 19% 158.5 38% 114.9 Net contribution 295.1 13% 260.9 5% 248.9 Fixed compensation and benefits 51.3 11% 46.1 (2)% 47.2 Other fixed expenses 67.4 45% 46.5 19% 39.0 Bad debts, net of recoveries and impairment 1.8 200% 0.6 (94)% 9.8 Total non-variable direct expenses 120.5 29% 93.2 (3)% 96.0 Segment income $ 174.6 4% $ 167.7 10% $ 152.9 Year Ended September 30, 2022 % Change 2021 % Change 2020 Operating Revenues (in millions): Listed derivatives $ 190.0 16% $ 164.1 8% $ 151.6 OTC derivatives — n/m — (100)% 0.2 Securities 513.4 18% 436.0 16% 376.1 FX contracts 28.4 76% 16.1 (33)% 24.0 Interest / fees earned on client balances 46.1 352% 10.2 (62)% 26.5 Other 53.9 28% 42.0 (8)% 45.7 $ 831.8 24% $ 668.4 7% $ 624.1 Volumes and Other Select Data (all $ amounts are U.S. dollar equivalents): Listed derivatives (contracts, 000’s) 130,285 13% 115,197 (8)% 125,397 Listed derivatives, average rate per contract (1) $ 1.36 (1)% $ 1.38 18% $ 1.17 Average client equity - listed derivatives (millions) $ 3,547 62% $ 2,195 26% $ 1,746 Securities ADV ( millions) $ 3,459 25% $ 2,776 61% $ 1,729 Securities RPM (2) $ 579 (5)% $ 610 (28)% $ 845 Average money market / FDIC sweep client balances (millions) $ 1,784 21% $ 1,471 30% $ 1,130 FX contracts ADV ( millions) $ 3,983 142% $ 1,647 25% $ 1,322 FX contracts RPM $ 28 (26)% $ 38 (47)% $ 72 n/m = not meaningful to present as a percentage (1) Give-up fee revenue are excluded from the calculation of listed derivative, average rate per contract.
Year Ended September 30, (in millions) 2023 % Change 2022 % Change 2021 Revenues: Sales of physical commodities $ — —% $ — —% $ — Principal gains, net 359.2 7% 337.2 8% 312.0 Commission and clearing fees 268.8 (5)% 283.8 15% 246.0 Consulting, management, and account fees 72.9 126% 32.2 79% 18.0 Interest income 812.7 355% 178.6 93% 92.4 Total revenues 1,513.6 82% 831.8 24% 668.4 Cost of sales of physical commodities — —% — —% — Operating revenues 1,513.6 82% 831.8 24% 668.4 Transaction-based clearing expenses 187.9 (7)% 202.4 10% 184.1 Introducing broker commissions 35.4 12% 31.7 15% 27.5 Interest expense 758.3 564% 114.2 205% 37.4 Net operating revenues 532.0 10% 483.5 15% 419.4 Variable compensation and benefits 180.5 (4)% 188.4 19% 158.5 Net contribution 351.5 19% 295.1 13% 260.9 Fixed compensation and benefits 59.7 16% 51.3 11% 46.1 Other fixed expenses 77.5 15% 67.4 45% 46.5 Bad debts, net of recoveries (1.5) (183)% 1.8 200% 0.6 Total non-variable direct expenses 135.7 13% 120.5 29% 93.2 Other gain 2.1 n/m — n/m — Segment income $ 217.9 25% $ 174.6 4% $ 167.7 Year Ended September 30, 2023 % Change 2022 % Change 2021 Operating Revenues (in millions): Listed derivatives $ 186.0 (2)% $ 190.0 16% $ 164.1 Securities 973.6 90% 513.4 18% 436.0 FX contracts 39.4 39% 28.4 76% 16.1 Interest / fees earned on client balances 239.5 420% 46.1 352% 10.2 Other 75.1 39% 53.9 28% 42.0 $ 1,513.6 82% $ 831.8 24% $ 668.4 Volumes and Other Select Data (all $ amounts are U.S. dollar equivalents): Listed derivatives (contracts, 000’s) 125,862 (3)% 130,285 13% 115,197 Listed derivatives, average rate per contract (1) $ 1.36 —% $ 1.36 (1)% $ 1.38 Average client equity - listed derivatives (millions) $ 5,210 47% $ 3,547 62% $ 2,195 Securities ADV ( millions) $ 5,257 52% $ 3,459 25% $ 2,776 Securities RPM (2) $ 301 (40)% $ 503 (15)% $ 593 Average money market / FDIC sweep client balances (millions) $ 1,338 (25)% $ 1,784 21% $ 1,471 FX contracts ADV ( millions) $ 4,321 8% $ 3,983 142% $ 1,647 FX contracts RPM $ 37 32% $ 28 (26)% $ 38 n/m = not meaningful to present as a percentage (1) Give up fees, related to contract excution for clients of other FCMs, are excluded from the calculation of listed derivative, average rate per contract.
Effect if Actual Results Differ From Assumptions Our valuation assumptions may be incorrect, and the actual value realized upon closing any position could be different from estimated carrying value, because of changes in prices, assumptions, or the overall business environment. We do not believe that there is a reasonable likelihood that such a possibility will be significant.
Effect if Actual Results Differ From Assumptions Our valuation assumptions may be incorrect, and the actual value realized upon closing any position could be different from estimated carrying value, because of changes in prices, assumptions, or the overall business environment.
Operating revenues derived from FX / CFD contracts increased $85.0 million, or 38%, to $310.9 million, primarily as a result of a 32% increase in RPM and a 3% increase in FX/CFD contracts ADV compared to the year ended September 30, 2021.
Operating revenues derived from FX / CFD contracts increased $85.0 million, or 38%, to $310.9 million, primarily as a result of a 32% increase in RPM and a 3% increase in FX/CFD contracts ADV compared to the year ended September 30, 2021. These increases were principally driven by heightened volatility which results in increased client trading activity and spread capture.
In addition, a global recession or slowdown could lead to extended periods of lower short-term interest rates and decreased volatility which could adversely affect our profitability and/or reduce our access to capital markets.
In addition, in the event that a global recession or slowdown occurs, this could lead to extended periods of low short-term interest rates and decreased volatility which could adversely affect our profitability.
Year Ended September 30, (in millions) 2022 % Change 2021 % Change 2020 Revenues: Sales of physical commodities $ 63,162.7 60% $ 39,420.3 (25)% $ 52,593.9 Principal gains, net 343.0 40% 245.5 26% 194.1 Commission and clearing fees 168.8 (5)% 178.3 27% 140.1 Consulting, management and account fees 21.9 11% 19.7 5% 18.8 Interest income 46.8 132% 20.2 (13)% 23.2 Total revenues 63,743.2 60% 39,884.0 (25)% 52,970.1 Cost of sales of physical commodities 63,051.1 60% 39,349.2 (25)% 52,538.6 Operating revenues 692.1 29% 534.8 24% 431.5 Transaction-based clearing expenses 55.9 4% 54.0 32% 40.8 Introducing broker commissions 31.5 (9)% 34.7 45% 24.0 Interest expense 18.2 40% 13.0 (2)% 13.3 Net operating revenues 586.5 35% 433.1 23% 353.4 Variable direct compensation and benefits 171.2 28% 133.4 20% 111.2 Net contribution 415.3 39% 299.7 24% 242.2 Fixed compensation and benefits 49.8 —% 49.9 3% 48.5 Other fixed expenses 65.6 34% 49.1 13% 43.5 Bad debts, net of recoveries and impairment 11.6 36% 8.5 2% 8.3 Total non-variable direct expenses 127.0 18% 107.5 7% 100.3 Segment income $ 288.3 50% $ 192.2 35% $ 141.9 Year Ended September 30, 2022 % Change 2021 % Change 2020 Operating Revenues (in millions): Listed derivatives $ 240.5 8% $ 223.5 26% $ 176.9 OTC derivatives 208.3 45% 143.4 29% 111.0 Physical contracts 180.4 36% 132.2 21% 109.6 Interest / fees earned on client balances 41.3 183% 14.6 1% 14.5 Other 21.6 2% 21.1 8% 19.5 $ 692.1 29% $ 534.8 24% $ 431.5 Select data (all $ amounts are U.S. dollar equivalent): Listed derivatives (contracts, 000’s) 30,323 (2)% 30,904 6% 29,255 Listed derivatives, average rate per contract (1) $ 7.54 9% $ 6.92 26% $ 5.48 Average client equity - listed derivatives (millions) $ 2,149 30% $ 1,648 62% $ 1,019 Over-the-counter (“OTC”) derivatives (contracts, 000’s) 2,968 16% 2,557 21% 2,113 OTC derivatives, average rate per contract $ 70.49 27% $ 55.70 7% $ 52.19 (1) Give-up fees as well as cash and voice brokerage are excluded from the calculation of listed derivatives, average rate per contract.
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. 46 Table of Contents Year Ended September 30, (in millions) 2023 % Change 2022 % Change 2021 Revenues: Sales of physical commodities $ 57,559.9 (9)% $ 63,162.7 60% $ 39,420.3 Principal gains, net 331.5 (3)% 343.0 40% 245.5 Commission and clearing fees 178.0 5% 168.8 (5)% 178.3 Consulting, management and account fees 25.7 17% 21.9 11% 19.7 Interest income 154.1 229% 46.8 132% 20.2 Total revenues 58,249.2 (9)% 63,743.2 60% 39,884.0 Cost of sales of physical commodities 57,386.5 (9)% 63,051.1 60% 39,349.2 Operating revenues 862.7 25% 692.1 29% 534.8 Transaction-based clearing expenses 60.7 9% 55.9 4% 54.0 Introducing broker commissions 40.1 27% 31.5 (9)% 34.7 Interest expense 40.6 123% 18.2 40% 13.0 Net operating revenues 721.3 23% 586.5 35% 433.1 Variable direct compensation and benefits 176.4 3% 171.2 28% 133.4 Net contribution 544.9 31% 415.3 39% 299.7 Fixed compensation and benefits 61.1 23% 49.8 —% 49.9 Other fixed expenses 77.4 18% 65.6 34% 49.1 Bad debts, net of recoveries 15.7 35% 11.6 36% 8.5 Total non-variable direct expenses 154.2 21% 127.0 18% 107.5 Segment income $ 390.7 36% $ 288.3 50% $ 192.2 Year Ended September 30, 2023 % Change 2022 % Change 2021 Operating Revenues (in millions): Listed derivatives $ 230.5 (4)% $ 240.5 8% $ 223.5 OTC derivatives 232.2 11% 208.3 45% 143.4 Physical contracts 232.9 29% 180.4 36% 132.2 Interest / fees earned on client balances 142.2 244% 41.3 183% 14.6 Other 24.9 15% 21.6 2% 21.1 $ 862.7 25% $ 692.1 29% $ 534.8 Select data (all $ amounts are U.S. dollar equivalent): Listed derivatives (contracts, 000’s) 34,430 14% 30,323 (2)% 30,904 Listed derivatives, average rate per contract (1) $ 6.37 (16)% $ 7.54 9% $ 6.92 Average client equity - listed derivatives (millions) $ 1,927 (10)% $ 2,149 30% $ 1,648 Over-the-counter (“OTC”) derivatives (contracts, 000’s) 3,553 20% 2,968 16% 2,557 OTC derivatives, average rate per contract $ 65.78 (7)% $ 70.49 27% $ 55.70 (1) Give up fees, related to contract execution for clients of other FCMs, as well as cash and voice brokerage are excluded from the calculation of listed derivatives, average rate per contract.
Interest expense Year Ended September 30, 2022 2021 $ Change % Change Interest expense attributable to: Trading activities: Institutional dealer in fixed income securities $ 62.3 $ 9.6 $ 52.7 549 % Securities borrowing 23.0 17.6 5.4 31 % Client balances on deposit 17.4 1.5 15.9 1,060 % Short-term financing facilities of subsidiaries and other direct interest of operating segments 32.8 20.9 11.9 57 % 135.5 49.6 85.9 173 % Corporate funding 44.7 41.3 3.4 8 % Total interest expense $ 180.2 $ 90.9 $ 89.3 98 % The increase in interest expense attributable to trading activities is principally due to the increase in fixed income business activities within our Institutional segment, an increase in interest on client balances principally due to higher short-term rates, and increase in average borrowings within our Commercial segment, along with the impact of the increases in short-term interest rates during the year ended September 30, 2022. 36 Table of Contents Year Ended September 30, 2021 Compared to Year Ended September 30, 2020 Transaction-based clearing expenses Year Ended September 30, 2021 2020 $ Change % Change Transaction-based clearing expenses $ 271.7 $ 222.5 $ 49.2 22 % Percentage of operating revenues 16 % 17 % The increase in transaction-based clearing expenses 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 exchange fees within our Institutional segment, resulting from the increase in securities ADV, and our Commercial segment, resulting from the increase in listed derivative contract volumes.
Interest expense Year Ended September 30, 2022 2021 $ Change % Change Interest expense attributable to: Trading activities: Institutional dealer in fixed income securities $ 62.3 $ 9.6 $ 52.7 549 % Securities borrowing 23.0 17.6 5.4 31 % Client balances on deposit 17.4 1.5 15.9 1,060 % Short-term financing facilities of subsidiaries and other direct interest of operating segments 32.8 20.9 11.9 57 % 135.5 49.6 85.9 173 % Corporate funding 44.7 41.3 3.4 8 % Total interest expense $ 180.2 $ 90.9 $ 89.3 98 % The increase in interest expense attributable to trading activities was principally due to the increase in fixed income business activities within our Institutional segment, increased interest on client balances principally due to higher short-term rates, and increased average borrowings within our Commercial segment, along with the impact of the increases in short-term interest rates.
For information about the assets of this segment, see Note 22 to the Consolidated Financial Statements. Year Ended September 30, 2022 Compared to Year Ended September 30, 2021 Operating revenues increased $157.3 million, or 29%, to $692.1 million in the year ended September 30, 2022 compared to $534.8 million in the year ended September 30, 2021.
For information about the assets of this segment, see Note 22 to the Consolidated Financial Statements. Year Ended September 30, 2023 Compared to Year Ended September 30, 2022 Operating revenues increased $170.6 million, or 25%, to $862.7 million in the fiscal year ended September 30, 2023 compared to $692.1 million in the fiscal year ended September 30, 2022.
Year Ended September 30, (in millions) 2022 % Change 2021 % Change 2020 Revenues: Sales of physical commodities $ — — $ — — $ — Principal gains, net 162.9 26% 128.8 16% 110.8 Commission and clearing fees 6.2 19% 5.2 27% 4.1 Consulting, management, account fees 2.8 (15)% 3.3 32% 2.5 Interest income 0.1 n/m — —% — Total revenues 172.0 25% 137.3 17% 117.4 Cost of sales of physical commodities — —% — —% — Operating revenues 172.0 25% 137.3 17% 117.4 Transaction-based clearing expenses 7.8 20% 6.5 27% 5.1 Introducing broker commissions 1.5 88% 0.8 14% 0.7 Interest expense 0.2 100% 0.1 —% 0.1 Net operating revenues 162.5 25% 129.9 17% 111.5 Variable compensation and benefits 31.3 19% 26.2 20% 21.9 Net contribution 131.2 27% 103.7 16% 89.6 Fixed compensation and benefits 18.9 29% 14.7 25% 11.8 Other fixed expenses 14.8 44% 10.3 12% 9.2 Bad debts 0.1 (50)% 0.2 n/m — Total non-variable direct expenses 33.8 34% 25.2 20% 21.0 Segment income $ 97.4 24% $ 78.5 14% $ 68.6 Year Ended September 30, 2022 % Change 2021 % Change 2020 Operating Revenues (in millions): Payments $ 167.8 25% $ 133.8 17% $ 114.6 Other 4.2 20% 3.5 25% 2.8 $ 172.0 25% $ 137.3 17% $ 117.4 Select data (all $ amounts are U.S. dollar equivalents): Global Payments ADV (millions) $ 62 15% $ 54 20% $ 45 Global Payments RPM (1) $ 10,880 10% $ 9,921 (2)% $ 10,092 (1) Rate per million is based on principal gains, net and commission and clearing fees revenues and the ADV shown above.
Year Ended September 30, (in millions) 2023 % Change 2022 % Change 2021 Revenues: Sales of physical commodities $ — —% $ — —% $ — Principal gains, net 200.3 23% 162.9 26% 128.8 Commission and clearing fees 7.2 16% 6.2 19% 5.2 Consulting, management, account fees 3.4 21% 2.8 (15)% 3.3 Interest income 1.7 1,600% 0.1 n/m — Total revenues 212.6 24% 172.0 25% 137.3 Cost of sales of physical commodities — —% — —% — Operating revenues 212.6 24% 172.0 25% 137.3 Transaction-based clearing expenses 6.8 (13)% 7.8 20% 6.5 Introducing broker commissions 2.3 53% 1.5 88% 0.8 Interest expense 0.2 —% 0.2 100% 0.1 Net operating revenues 203.3 25% 162.5 25% 129.9 Variable compensation and benefits 38.8 24% 31.3 19% 26.2 Net contribution 164.5 25% 131.2 27% 103.7 Fixed compensation and benefits 36.6 94% 18.9 29% 14.7 Other fixed expenses 18.8 27% 14.8 44% 10.3 Bad debts — (100)% 0.1 (50)% 0.2 Total non-variable direct expenses 55.4 64% 33.8 34% 25.2 Segment income $ 109.1 12% $ 97.4 24% $ 78.5 Year Ended September 30, 2023 % Change 2022 % Change 2021 Operating Revenues (in millions): Payments $ 208.3 24% $ 167.8 25% $ 133.8 Other 4.3 2% 4.2 20% 3.5 $ 212.6 24% $ 172.0 25% $ 137.3 Select data (all $ amounts are U.S. dollar equivalents): Global Payments ADV (millions) $ 67 8% $ 62 15% $ 54 Global Payments RPM $ 12,367 14% $ 10,880 10% $ 9,921 For information about the assets of this segment, see Note 22 to the Consolidated Financial Statements.
For information about the assets of this segment, see Note 22 to the Consolidated Financial Statements. 47 Table of Contents Year Ended September 30, 2022 Compared to Year Ended September 30, 2021 Operating revenues increased $163.4 million, or 24%, to $831.8 million in the year ended September 30, 2022 compared to $668.4 million in the year ended September 30, 2021.
For information about the assets of this segment, see Note 22 to the Consolidated Financial Statements. 49 Table of Contents Year Ended September 30, 2023 Compared to Year Ended September 30, 2022 Operating revenues increased $681.8 million, or 82%, to $1,513.6 million in the fiscal year ended September 30, 2023 compared to $831.8 million in the fiscal year ended September 30, 2022.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

6 edited+2 added−0 removed15 unchanged
Biggest changeAs 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. 66 Table of Contents
Biggest changeAlthough 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.
The graph below summarizes volatility of our daily revenue, determined on a marked-to-market basis, during the year ended September 30, 2022. 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.
The graph below summarizes volatility of our daily revenue, determined on a marked-to-market basis, during the year ended September 30, 2023. 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.
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. 64 Table of Contents Management believes that the volatility of revenues is a key indicator of the effectiveness of its risk management techniques.
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. 65 Table of Contents Management believes that the volatility of revenues is a key indicator of the effectiveness of its risk management techniques.
We estimate that as of September 30, 2022, an immediate 25 basis point decrease in short-term interest rates would result in approximately $7.1 million less in annual net income. 65 Table of Contents We manage interest expense using a combination of variable and fixed rate debt. The debt instruments are carried at their unpaid principal balance which approximates fair value.
We estimate that as of September 30, 2023, an immediate 25 basis point decrease in short-term interest rates would result in approximately $4.2 million less in annual net income. 66 Table of Contents We manage interest expense using a combination of variable and fixed rate debt. The debt instruments are carried at their unpaid principal balance which approximates fair value.
As of September 30, 2022, $485.1 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 September 30, 2022, $347.9 million of outstanding principal debt was fixed-rate long-term debt.
As of September 30, 2023, $341.0 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 September 30, 2023, $347.9 million of outstanding principal debt was fixed-rate long-term debt.
Virtually 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.
Principally, all sales are denominated in the functional currency of the subsidiary, while related operating costs are denominated in the currency of the local country and translated into USD for consolidated reporting purposes.
Added
We have executed hedging transactions in relation to certain currencies to mitigate our exposure to volatility in those certain foreign currency exchange rates. From time-to-time, we may consider entering into larger hedges in those certain contracts or hedging transactions in additional currencies to mitigate our exposure to more foreign currency exchange rates.
Added
These hedging transactions may not be successful. 67 Table of Contents

Other SNEX 10-K year-over-year comparisons