FCSTONE GROUP, INC.

FCSTONE GROUP, INC.

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Company Overview
FCStone Group, Inc. is an American-based company engaged in the provision of risk management consulting and transaction execution services to commercial commodity intermediaries, end-users and producers. The company was formed as Saul Stone and Company by Mr. Saul Stone in 1924. It is headquartered in West Des Moines, Iowa, United States, and is publicly traded on the NASDAQ National Market under the trading symbol FCSX.
The company assists primarily the middle market customers that deal with such commodities as cotton seed, cotton seed oil, crude oil, currencies/foreign exchange, dairy products, diesel fuel, edible beans, ethanol, financial instruments, gasoline, jet fuel, livestock and meats, lumber, orange juice, propane, sugar, and wheat. In addition to its risk management consulting services, the company operates an independent clearing and execution platforms for exchange-traded futures and options contracts.
The company has 13 offices in the U.S. and four international locations. It has executed 44.3 million contracts in the exchange-traded and over-the-counter (OTC) markets and serves more than 7,500 customers. It controls and operates more than 3,000 grain rail cars, and ships more than 100 million bushels of grain through a deepwater port in Alabama. Its vision is to be acknowledged as the premier commodity risk management company worldwide.
The company operates in four business divisions: commodity and risk management services (C&RM), which offers commodity services with an emphasis on risk management using futures, options and other derivative instruments; clearing and execution services, which provides low-cost clearing and direct execution services primarily to commodities firms, fund operators, and commodities traders; financial services, which provides financing and facilitation services for customers to carry grain and other commodities; and grain merchandising, which acts as a dealer and manager of grain and fertilizer in the U.S. and international markets.
Business Summary
FCStone Group, Inc. is an integrated commodity risk management company providing risk management consulting and transaction execution services to commercial commodity intermediaries, end users and producers. It assists primarily middle market customers. In addition, to its risk management consulting services, the Company operates an independent clearing and execution platforms for exchange-traded futures and options contracts. The Company serves more than 8,000 customers. During the fiscal year ended August 31, 2008 (fiscal 2008), it executed more than 100 million contracts in the exchange-traded and over-the-counter (OTC) markets. The Company operates in three segments: commodity and risk management services (C&RM), clearing and execution services, and financial services. In January 2009, the Company acquired Elders Risk Management Pty Ltd. In September 2009, the Company sold its 25% interest in FGDI, L.L.C. to Agrex, Inc.
Description and history
FCStone Group, Inc. is an integrated commodity risk management company providing risk management consulting and transaction execution services to commercial commodity intermediaries, end users and producers. It assists primarily middle market customers. In addition, to its risk management consulting services, the Company operates an independent clearing and execution platforms for exchange-traded futures and options contracts. The Company serves more than 8,000 customers. During the fiscal year ended August 31, 2008 (fiscal 2008), it executed more than 100 million contracts in the exchange-traded and over-the-counter (OTC) markets. It also assists its customers with the financing, transportation and merchandising of their physical commodity requirements and inventories. The Company operates in three segments: commodity and risk management services (C&RM), clearing and execution services, and financial services. Effective February 1, 2008, the Company acquired Globecot, Inc. and The Jernigan Group, LLC. In January 2009, the Company acquired Elders Risk Management Pty Ltd, an Australia-based company that specializes in risk management for the producers and users of agricultural commodities, including grains, livestock, cotton and wool. In September 2009, the Company sold its 25% interest in FGDI, L.L.C. to Agrex, Inc. In October 2009, International Assets Holding Corp. announced the completion of the merger of International Assets and FCStone Group, Inc.

The Company provides its customers with various levels of commodity risk management services, ranging from value-added consulting services delivered through its integrated risk management program (IRMP) to lower-margin clearing and execution services for exchange-traded derivative contracts. The Company offers its customers access to both exchange-traded and OTC derivative markets, integrating the two platforms into a product. The Company also offers clearing and execution services to a range of participants in exchange-traded futures and options markets, including commercial accounts, professional traders, managed futures funds, introducing brokers and retail customers.

Commodity and Risk Management Services

The C&RM segment offers risk management consulting and access to the commodity derivative markets. In C&RM segment, the Company derives revenue from four primary sources: commission and clearing fee revenues from exchange-traded futures and options contracts and Forex trades; brokerage fees from OTC transactions; interest income derived from both investable exchange customer segregated asset balances and OTC customer margin assets, as well as from its excess funds, and risk management service and consulting fees. The Company’s customers in this segment consist of middle-market commodity intermediaries, end users and producers, focused primarily in the areas of domestic and international grain, renewable fuels and energy. In fiscal 2008, this segment represented approximately 76% of the Company’s consolidated income before minority interest, income tax and corporate overhead.

Clearing and Execution Services

The Company seeks to provide clearing and execution of exchange-traded futures and options for the institutional and professional trader market segments through the Stone division of its subsidiary, FCStone LLC. Through its platform, the Company accepts customer orders and directs those orders to the appropriate exchange for execution. The Company then facilitates the clearing of its customers’ transactions. Clearing involves the matching of its customers’ trades with the exchange, the collection and management of margin deposits to support the transactions, and the accounting and reporting of the transactions to its customers.

The Company services approximately 2,000 customers through a Wholesale Division and a Professional Trading Division. Wholesale division customers generally consist of non-clearing futures commission merchant (FCMs), introducing brokers and clearing FCMs, for which it provides back-office services, such as trade processing and accounting. These customers serve as intermediaries to the ultimate customer transacting the futures or options contract. The professional trading customers consist of retail-oriented introducing brokers, professional traders and floor traders. Through its retail division, the Company targets users of the futures and options markets, and also target managed futures funds, hedge funds and commodity trading advisors.

Financial Services

The Financial Services segment is composed of two wholly owned subsidiaries: FCStone Financial, Inc. and FCStone Merchant Services, LLC. FCStone Financial, Inc. serves as a grain financing and facilitation business, through which the Company lends to commercial grain-related companies against physical grain inventories. It uses sale/repurchase agreements to purchase grain evidenced by warehouse receipts at local grain elevators subject to a simultaneous agreement to sell such grain back to the original seller at a later date. FCStone Merchant Services, LLC serves as a financing vehicle for a number of different commodities, including grain, energy products and renewable fuels. These arrangements can take the form of fixed repurchase agreements, hedged commodity transactions or traditional lending arrangements, which includes providing letters of credit.

Formed as Saul Stone and Company by Mr. Saul Stone

Business Line
Engaged in the provision of risk management consulting and transaction execution services to commercial commodity intermediaries, end-users and producers
Subsidiary
ELDERS RISK MANAGEMENT PTY LTD
Advisor
KPMG LLP
IPO date
3/16/2006
US SIC Code
6289
Company Address
Suite 800
1251, NW Briarcliff Parkway
City province or state postal code
64116, KANSAS CITY, MO
Phone: +1 816 410 7120
Fax:
Country address: UNITED STATES OF AMERICA
Website url: www.fcstone.com