US broker and clearing firm INTL FCStone has made the headlines over the past few months. Earlier in March, it announced the acquisition of GAIN Capital, the largest provider of retail FX in the United States. The all-cash transaction represents about $236 million in equity value.
Finance Magnates had the chance to set up an interview with Mr. Sean O’Connor, CEO of INTL FCStone, to get his take on recent developments and discover more about what it takes to secure a slice in the highly competitive industry. What follows is the summary of our conversation.
- INTL FCStone shareholders approved last week rebranding the firm as StoneX Group Inc. What has been the impetus behind this initiative? And from a client perspective, what is the importance of this rebrand for current and prospective customers?
Our rebrand is the continuation of a strategy that we set out for the business since its inception – to have a strong organic growth rate and to be a strategic, but opportunistic consolidator of firms. Part of the impetus was to shed the name that was a result of multiple prior acquisitions and to debut StoneX as an institutional-grade financial services network that connects clients to the global markets ecosystem through a unique blend of digital platforms, end-to-end clearing and execution services, and high-touch expertise.
With the goal to provide our end customer a platform that can assist them throughout the entire lifecycle of a trade from traditional equities to commodities and foreign exchange. Additionally, we have ability to scale digitally and provide complimentary products will benefit both current and prospective customers.
- StoneX’s recent acquisition of Gain Capital. Was the decision based on the strengths of Gain itself as the largest retail FX broker in the United States or it was part of a wider positioning to delve into the FX industry. And How does that tie into rebranding the whole business?
While the Gain acquisition and the rebrand were unconnected from the beginning the timing of the finalizing of that deal and this larger plan to unite all the pieces under the StoneX network worked quite nicely. Gain was beneficial from a financial and strategic standpoint and it provided us with the intellectual assets to enhance our strategy to become the best-in-class financial platform, connecting clients to the global markets across asset classes, offering vertically integrated execution and clearing.
We’ll look to leverage Gain’s highly digitized and efficient on-ramp for smaller customers, and we think we can deploy that on-ramp throughout our other businesses in order to make our goal of becoming an institutional grade global financial network a reality.
- Do you have more acquisitions in the pipeline globally, or in the US, and what are sectors you are more interested in?
We’re always looking for acquisitions that can benefit our clients and our network as long as we feel they are priced right. Over the last 10 years, we’ve focused on adding all of the markets and venues that we think are of interest to clients, frankly that’s sort of a never-ending process. As an example, our UOB acquisition in 2019 was great for us as it positioned StoneX well in key exchanges and markets in Asia, providing us a platform to expand our business in the region. We’ll continue to evaluate opportunities to add products and capabilities, to continue to drive the industry forward, expand our network, and be front and center with our customers.
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- Having taken hold of daily life worldwide, the Coronavirus has pulverized almost all previous plans and forecasts. With the effects being felt in almost every sector, how are you responding and what has changed?
At the outset of the COVID crisis, we adopted a simple 4-point plan. First, keep all of our employees and their families safe. This was made possible by our exceptional IT team who quickly saw the situation unfolding and upgraded our systems and capabilities to allow for a seamless widespread move to a work from home environment. We are currently about 95% work-from-home.
Second aspect of our plan was to continue to be there for our clients without assuming major risk, no matter how crazy or volatile the markets are. In order to facilitate this, we focused on point three which was to reduce our risk and inventory in order to take a very defensive position to ensure highest possible levels of liquidity and allow us to continue to appropriately service our clients. The fourth and final point was to work with our clients directly essentially acting as risk managers for our clients to be sure they have full appreciation of their own risk and like us, reduce their exposure appropriately.
While we’ve successfully weathered the first phase of this, I do think we’re entering a different phase now. And maybe there will be less volatility, but we are now seeing a breakdown of supply chains and liquidity risk rippling through the markets. This was most obvious in the oil markets where WTI traded down to negative territory for the first time in history.
- How do you look at the intensifying, industrywide war to give investors zero-commission trades. Would it ultimately kill off the fee-based brokerage model altogether with more and more services are handed out for free, and how these types of aggressive price cuts affect StoneX’s business?
I don’t think zero-commission trades will impact our overall business because while the commission is an aspect, it’s not what clients come to us for. Instead they come to us for are ability to provide access and execute on nearly every major exchange in the world, delivering support throughout the entire lifecycle of a transaction, from consulting and boots-on-the-ground intelligence, efficient execution, to post-trade clearing, custody and settlement – a full platform that can’t be easily acquired elsewhere.
This is also relates back to the rebrand as we want people to think of us as more as just someone who can make a trade for you we want our clients to think of us as a partner who can provide them with support throughout the entire life cycle of their trade in order to make sure their investment strategy is properly executed on.
- Recently, many trading platforms went offline, including some high-flying apps, leaving their users feeling robbed after they missed out on gains they could have made. How do you look at these outages and could we expect these crashes to seem familiar amid unprecedented market volatility?
We did see a number of players, some very large and respected names, withdrawal pricing or market access to clients and potentially system outages. I’m proud to say that we were there consistently at all times for our clients, and I believe this commitment was noticed.
We’ve experienced some truly historic volatility over these past few months and I think the firms that can show their clients that they’re there for them during this period, like we did, will build stronger long-term relationships.
- You are clearly passionate about your work since you have been with the company since 2002. How have you seen both StoneX and the space evolve over that time?
I think the most interesting trend that I noticed over the past two decades is the very trend that made us the successful firm we are today. It started in earnest in the wake of the last financial crisis but prior to that as well due to additional regulatory concerns and increased costs with major institutional players withdrawing from markets and narrowing their offerings as result. While the banks may have withdrew from the market, the customers didn’t leave, and I saw many looking for the same high level of service they were used to in the past. Our strategic but opportunistic acquisitions gave us access to these new markets and client segments providing us with many unexpected opportunities for growth.