StoneX Group Inc. (SNEX) FY 2022 MD&A

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Throughout this document, unless the context otherwise requires, the terms “Company”, “we”, “us” and “our” refer to StoneX Group Inc. and its consolidated subsidiaries.

The following discussion and analysis should be read in conjunction with the consolidated financial statements and notes thereto appearing elsewhere in this report. This Annual Report on Form 10-K contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These forward-looking statements involve known and unknown risks and uncertainties, many of which are beyond the control of the Company, including adverse changes in economic, political and market conditions, losses from our market-making and trading activities arising from counterparty failures and changes in market conditions, the 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. Although we believe that our forward-looking statements are based upon reasonable assumptions regarding our business and future market conditions, there can be no assurances that our actual results will not differ materially from any results expressed or implied by our forward-looking statements. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law. We caution readers that any forward-looking statements are not guarantees of future performance.

Overview

We operate a global financial services network that connects companies, organizations, traders and investors to the global market ecosystem through a unique blend of digital platforms, end-to-end clearing and execution services, high touch service and deep expertise. We strive to be the one trusted partner to our clients, providing our network, products and services to allow them to pursue trading opportunities, manage their market risks, make investments and improve their business performance. Our businesses are supported by our global infrastructure of regulated operating subsidiaries, our advanced technology platforms and our team of more than 3,600 employees as of September 30, 2022. We believe our client-first approach differentiates us from large banking institutions, engenders trust and has enabled us to establish leadership positions in a number of complex fields in financial markets around the world. For additional information, see Overview of Business and Strategy within Item 1. Business section of this Annual Report on Form 10-K.

We report our operating segments based primarily on the nature of the clients we serve (commercial, institutional, and retail), and a fourth operating segment, our global payments business. This structure allows us to efficiently serve clients in more than 180 countries and manage our large global footprint. 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. 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. Our platform delivers support throughout the entire lifecycle of a transaction, from consulting and boots-on-the-ground intelligence, to efficient execution, to post-trade clearing, custody and settlement.

Current Trends Affecting the Financial Services Industry

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. Department of Treasury and other governing bodies in countries in which we conduct business, have created significant market volatility, uncertainty and economic disruption. While increased volatility is typically a driver of increased client activity and growth in our operating revenues, longer periods of extreme volatility and dislocation in global securities, foreign exchange and commodity markets may affect our ability to establish effective offsetting positions in our principal trading and market-making activities, which may expose us to trading losses. 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. 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.

In addition, the continuation of the COVID-19 pandemic and the conflict between Ukraine and Russia 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. 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. See “Risk Factors” in Part I, Item 1A in this Form 10-K for a discussion of other risks that may affect our financial condition and results of operations.

Executive Summary

Our fiscal 2022 was marked with the effects of widespread inflationary pressures on global markets, sharp increases in short term interest rates, and continued volatility in both the financial and physical commodities markets. This was especially prevalent following the Russian invasion of Ukraine, resulting in increases in client volumes and in most cases a widening of spreads captured, although we did experience a $5.4 million increase in bad debts, net of recoveries in the year ended September 30, 2022 compared to the prior year, as a result of the effect of this heightened market volatility on certain of our clients. The impact of these effects resulted in increased volumes across all of our product offerings during the year ended September 30, 2022, as well as a significant increase in interest and fee income earned on client balances. For the year ended September 30, 2022, we achieved record operating revenues across all four of our operating segments.

In fiscal 2022 we experienced strong growth in our client balances, as average client equity and average money-market/FDIC sweep balances increased 48% and 21%, respectively compared to the year ended September 30, 2021. This growth, combined with a significant increase in short term interest rates in the second half of the fiscal year, led to an increase of $63.3 million, or 243%, to $89.3 million in interest and fee income on client balances in the year ended September 30, 2022.

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, led by our Commercial and Institutional segments which added $157.3 million and $163.4 million, respectively, compared to the year ended September 30, 2021. Our Retail and Global Payments segments added $78.7 million and $34.7 million, respectively, compared to the year ended September 30, 2021.

Overall segment income increased $169.5 million, or 33%, compared to the year ended September 30, 2021. This growth in segment income was led by our Commercial segment which increased $96.1 million, or 50% compared to the year ended September 30, 2021, as a result of strong growth in operating revenues, benefiting from increased volatility and client activity. This growth in operating revenues was partially offset by a $19.5 million increase in non-variable direct expenses.

Institutional segment income increased $6.9 million, or 4% compared to the year ended September 30, 2021. This growth was principally driven by a 24% increase in operating revenues including a significant increase in both interest/fee income on client balances and in operating revenues derived from securities transactions, where securities average daily volumes (“ADV”) increased 25% compared to the year ended September 30, 2021, along with a 5% decline in securities rate per million (“RPM”) earned. This growth was partially offset by a $76.8 million increase in interest expense, primarily related to our institutional fixed income dealer and to a lesser extent our securities lending activities and interest paid to clients on their balances held. In addition, non-variable direct expenses increased $27.3 million compared to the year ended September 30, 2021.

32

Table of Contents

Segment income in our Retail segment increased $47.6 million or 70% compared to the year ended September 30, 2021, principally due to strong growth in operating revenues derived from FX/CFD contracts largely driven by a 32% increase in FX/CFD contracts RPM as a result of heightened volatility in global financial markets. This growth was partially offset by a decline in operating revenues derived from physical contracts and a $34.7 million increase in non-variable direct expenses compared to the year ended September 30, 2021.

Finally, Global Payments segment income increased $18.9 million, or 24% compared to the year ended September 30, 2021, as average daily volumes increased 15% and RPM increased 10% compared to the year ended September 30, 2021. These increases were partially offset by an $8.6 million increase in non-variable direct expenses.

Interest expense related to corporate funding purposes increased $3.4 million to $44.7 million in the year ended September 30, 2022 compared to $41.3 million in the year ended September 30, 2021, principally due to higher short-term interest rates and an increase in debt issuance costs related to the credit facility renewed in April 2022.

On the expense side, we continue to focus on maintaining our variable cost model and limiting the growth of our non-variable

expenses. Reflecting such efforts, variable expenses were 56% of total expenses in the current period, flat compared to the prior year period. Non-variable expenses, excluding bad debts increased $100.0 million compared to the year ended September 30, 2021, principally due to higher selling and marketing expenses, fixed compensation and benefits, trading system and market information, professional fees, non-trading technology, travel and business development expenses and depreciation and amortization.

Net income increased $90.8 million to $207.1 million in the year ended September 30, 2022 compared to $116.3 million in the year ended September 30, 2021. Diluted earnings per share were $10.01 for the year ended September 30, 2022 compared to $5.74 in the year ended September 30, 2021.

Selected Summary Financial Information

Results of Operations

Set forth below is our discussion of the results of our operations, as viewed by management, for the periods indicated.

Financial Overview

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:

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.

Operating revenues derived from listed derivatives increased $42.9 million, or 11%, to $430.5 million in the year ended September 30, 2022 compared to $387.6 million in the year ended September 30, 2021, principally driven by a 10% increase in listed derivative volumes.

Operating revenues in OTC derivatives increased $64.9 million, or 45%, to $208.3 million in the year ended September 30, 2022 compared to $143.4 million in the year ended September 30, 2021. This growth was principally driven by increased client activity in agricultural and soft commodity markets which resulted in a 16% increase in OTC contract volumes, as well as a 27% increase in the average rate per contract as a result of wider spreads in FX hedging and energy and renewable fuels markets.

34

Table of Contents

Operating revenue from securities transactions increased $76.8 million, or 14%, to $610.4 million in the year ended September 30, 2022 compared to $533.6 million in the year ended September 30, 2021. 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.

Operating revenues from FX/CFD contracts increased $97.3 million, or 40%, to $339.3 million in the year ended September 30, 2022 compared to $242.0 million in the year ended September 30, 2021, principally as a result of a 25% increase in FX/CFD contracts ADV, as well as a 11% increase in FX/CFD contracts RPM, both of which were driven by heightened volatility in global financial markets.

Operating revenues from global payments increased by $34.0 million, or 25%, to $167.8 million in the year ended September 30, 2022 compared to $133.8 million in the year ended September 30, 2021, principally as a result of a 15% increase in ADV, as well as a 10% increase in payments RPM.

Operating revenues from physical contracts increased $41.7 million, or 27%, to $194.3 million in the year ended September 30, 2022 compared to $152.6 million in the year ended September 30, 2021, principally due to increased client activity in agricultural and energy commodities, as well as continued strong client demand for precious metals.

Interest and fee income earned on client balances, which is associated with our listed and OTC derivative businesses, as well as our correspondent clearing and independent wealth management businesses, increased $63.3 million, or 243%, to $89.3 million in the year ended September 30, 2022 compared to $26.0 million in the year ended September 30, 2021, principally as a result of an increase in short term interest rates as well as increases in average client equity and average FDIC sweep client balances of 48% and 21%, respectively.

Year Ended September 30, 2021 Compared to Year Ended September 30, 2020

Operating revenues increased $364.8 million, or 28% to $1,673.1 million in the year ended September 30, 2021 compared to $1,308.3 million in the year ended September 30, 2020. The table above displays operating revenues disaggregated across the key products we provide to our clients.

Operating revenues from listed derivatives increased $59.1 million, or 18% to $387.6 million in the year ended September 30, 2021 compared to $328.5 million in the year ended September 30, 2020, principally driven by a 29% increase in the average rate per contract, which was partially offset by a 6% decline in listed derivative volumes.

Operating revenues in OTC derivatives increased $32.2 million, or 29% to $143.4 million in the year ended September 30, 2021 compared to $111.2 million in the year ended September 30, 2020. This growth was principally driven by increased client activity in agricultural markets which drove a 21% increase in OTC contract volumes.

Operating revenue from Securities transactions increased $75.3 million, or 16% to $533.6 million in the year ended September 30, 2021 compared to $458.3 million in the year ended September 30, 2020. This was principally a result of a 61% increase in securities ADV driven by increased client activity in fixed income markets and to a lesser extent equity products, which was partially offset by a 28% decline in RPM as a result of lower spreads in fixed income products.

Operating revenues from FX/CFD contracts increased $175.1 million, or 262% to $242.0 million in the year ended September 30, 2021 compared to $66.9 million in the year ended September 30, 2020, as a result of an incremental $183.0 million increase in FX/CFD contracts operating revenues in our Retail segment resulting from the acquisition of Gain, which was partially offset by lower FX operating revenues in our Institutional FX prime brokerage business.

Operating revenues from global payments increased by $19.2 million, or 17% to $133.8 million in the year ended September 30, 2021 compared to $114.6 million in the year ended September 30, 2020, principally as a result of a 20% increase in ADV.

Operating revenues from physical contracts increased $30.2 million, or 25% to $152.6 million in the year ended September 30, 2021 compared to $122.4 million in the year ended September 30, 2020, principally due to increased client activity in agricultural and energy commodities as well as continued strong client demand for precious metals.

Interest and fee income earned on client balances, which is associated with our listed and OTC derivative businesses, as well as our correspondent clearing and independent wealth management businesses, declined $16.7 million, or 39%, to $26.0 million in the year ended September 30, 2021 compared to $42.7 million in the year ended September 30, 2020, principally as a result of a significant decline in short term interest rates related to the FOMC’s actions to reduce the federal funds rate in March 2020. Partially offsetting the decline in short term interest rates was an increase in average client equity and average FDIC sweep client balances of 39% and 30%, respectively.

35

Table of Contents

Finally, related to the transfer of the majority of the operations of Gain’s U.K. domiciled subsidiaries into StoneX Financial Ltd., a U.S. dollar denominated entity, which was completed during the quarter ended March 2021, operating revenues for the year ended September 30, 2021 included a $4.9 million loss on derivative positions entered into to mitigate our exposure to the British Pound in the Gain subsidiaries in advance of the transfer as well as a $0.4 million foreign currency gain on revaluation related to the Gain U.K. domiciled subsidiaries. Prior to the transfer, the assets and liabilities of Gain’s U.K. subsidiaries were subject to translation to the U.S. dollar, and for the period beginning October 2020 through March 31, 2021, the foreign currency translation adjustment related to Gain’s U.K. subsidiaries resulted in a $10.3 million increase in “accumulated other comprehensive income”.

Interest and Transactional Expenses

Year Ended September 30, 2022 Compared to Year Ended September 30, 2021

Transaction-based clearing expenses

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 decline in the percentage of operating revenues is principally due to the significant increase in interest income.

Introducing broker commissions

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. The decline in the percentage of operating revenues is principally due to the significant increase in interest income.

Interest expense

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

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.

Introducing broker commissions

The increase in introducing broker commissions is principally due to increases in our Retail and Institutional segments related to incremental expense from the Gain acquisition. Additionally, higher revenues have resulted in increases costs within our Commercial segment and our Independent Wealth Management business.

Interest expense

The decrease in interest expense attributable to trading activities is principally due to the decrease in short-term interest rates. Interest expense on corporate funding increased principally due to incremental interest related to the issuance of our senior secured notes during June 2020, partially offset by lower short-term interest rates on our senior secured syndicated loan facility. In June 2020, we completed the issuance and sale of $350 million in aggregate principal amount of the Company’s 8.625% Senior Secured Notes due 2025 at the offering price of 98.5% of the aggregate principal amount.

Net Operating Revenues

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

37

Table of Contents

The table below presents a disaggregation of consolidated net operating revenues used by management in evaluating our performance, for the periods indicated:

Compensation and Other Expenses

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

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.

Compensation and Benefits:

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.

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. 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.

Other Expenses: Other non-compensation expenses increased $90.1 million, or 28%, to $410.3 million in the year ended September 30, 2022 compared to $320.2 million in the year ended September 30, 2021.

Trading systems and market information costs increased $7.4 million, principally due to higher costs in the Retail Forex, Debt Capital Markets, and LME Metals businesses.

Professional fees increased $13.4 million, principally due to higher legal and other consulting fees.

Non-trading technology and support increased $6.4 million, principally due to higher non-trading software implementation costs related to various IT systems.

Selling and marketing costs increased $22.0 million, principally due to increased campaigns related to our Retail Forex business, as well as costs of holding our bi-annual global sales and strategy meeting in March 2022.

Travel and business development increased $12.4 million principally due to several business line specific development meetings, as well as increases along all business lines with the lifting of certain social distancing and travel restrictions, following periods of limited travel due to responses by governments and societies to the COVID-19 pandemic.

Depreciation and amortization increased $7.9 million, principally due to the incremental depreciation expense from internally developed software placed into service.

Other expenses increased $14.3 million, principally due to higher insurance costs, non-income taxes, non-variable direct business related costs, and non-compensation employee based expenses.

Bad debt expense, net of recoveries increased $5.4 million over the prior year. During the year ended September 30, 2022, bad debt expense, net of recovery was $15.8 million, principally related to client trading account deficits in our Commercial, Institutional, Retail, and Global Payments segments of $11.6 million, $1.8 million, $2.3 million, and $0.1 million, respectively. During the year ended September 30, 2021, bad debts, net of recoveries were $10.4 million, principally related to client trading

39

Table of Contents

account deficits in our Commercial, Institutional, and Retail segments of $3.4 million, $0.6 million, and $1.1 million, respectively. Additionally, we recorded bad debt expense of $5.1 million related to trade receivables with physical clients.

Gain on Acquisitions and Other Gains, net: The results of the year ended September 30, 2022 include a nonrecurring gain of $6.4 million related to a foreign exchange antitrust class action settlement received in March 2022. The results of the year ended September 30, 2021 included a gain of $3.3 million related to an adjustment to the liabilities assumed as part of the Gain acquisition initially determined values, as of August 1, 2020.

Provision for Taxes: The effective income tax rate was 25% for the years ended September 30, 2022 and 2021. 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 effective income tax rate for the fiscal year ended September 30, 2022 and 2021 was higher than the U.S. federal statutory rate of 21% due to U.S. state and local taxes, changes in valuation allowances, U.K. bank tax, U.S. permanent differences, and the amount of foreign earnings taxed at higher tax rates.

Year Ended September 30, 2021 Compared to Year Ended September 30, 2020

Compensation and Other Expenses: Compensation and other expenses increased $256.1 million, or 34%, to $999.3 million in the year ended September 30, 2021 compared to $743.2 million in the year ended September 30, 2020.

Compensation and Benefits:

Non-variable salaries increased principally due to a full year of the costs associated with the Gain acquisition in the fourth quarter of the year ended September 30, 2020.

Employee benefits and other compensation, excluding share-based compensation, increased principally due to higher payroll, benefits, and retirement costs from the increased headcount.

Fixed compensation and benefits during the year ended September 30, 2021 include severance costs of $7.7 million, principally due to the departure of certain senior officers. During the during the year ended September 30, 2020, severance costs were $1.5 million.

Other Expenses: Other non-compensation expenses increased $95.7 million, or 43%, to $320.2 million in the year ended September 30, 2021 compared to $224.5 million in the year ended September 30, 2020.

Trading systems and market information costs increased $12.5 million, principally due to incremental costs in the retail forex business acquired as part of the Gain acquisition in the fourth quarter of fiscal 2020 and higher costs in our Institutional segment.

Professional fees increased $10.7 million, principally due to higher legal, consulting and accounting services fees.

Non-trading technology and support increased $17.6 million, principally due to incremental costs related to the Gain acquisition in the fourth quarter of fiscal 2020 in addition to higher non-trading software implementation costs related to various IT, client engagement, and accounting systems.

40

Table of Contents

Occupancy and equipment rental increased $10.7 million, principally due to additional leased office space.

Selling and marketing costs increased $21.1 million, principally due to incremental costs related to the acquired retail forex business, partially offset by the prior year including costs for the bi-annual global sales meeting held in February 2020.

Travel and business development decreased $4.4 million principally as a result of the impact of the response by governments and regulatory bodies to the COVID-19 pandemic, which included social distancing; travel restrictions, “shelter in place” and other governmental regulations.

Communications increased $2.3 million, principally due to incremental costs related to the Gain acquisition in the fourth quarter of fiscal 2020.

Depreciation and amortization increased $16.8 million, principally due to the amortization costs of the acquired intangible assets related to the Gain acquisition, as well as increases in depreciation of IT hardware, third-party software, internally developed software, and amortization of leasehold improvements.

Other expenses increased $16.7 million, primarily due to incremental costs from recent acquisitions most notably related to higher non-income taxes, insurance and recruiting costs.

Bad debts, net of recoveries and impairment decreased $8.3 million year-over-year. During the year ended September 30, 2021, bad debts, net of recoveries were $10.4 million, principally related to client trading account deficits in our Commercial, Institutional, and Retail segments of $3.4 million, $0.6 million, and $1.1 million, respectively. Additionally, we recorded bad debt expense of $5.1 million related to trade receivables with physical clients.

During the year ended September 30, 2020, bad debts, net of recoveries were $13.0 million, primarily related to client trading account deficits in our Commercial, Institutional, and Retail segments of $3.5 million, $5.7 million, and $0.6 million, respectively. Additionally, we recorded bad debt expense of $3.2 million related to trade receivables with physical clients.

In connection with the integration of Gain, the Company re-evaluated all trading systems utilized across the organization in order to identify duplicative systems. In connection with this process, the Company determined that certain legacy capitalized developed software costs within our OTC foreign exchange and physical metals business would no longer be placed into service and utilized as expected prior to the merger with Gain. As a result, the Company recorded impairment charges of $5.7 million in the year ended September 30, 2020.

Gain on Acquisitions and Other Gains, net: The results of the year ended September 30, 2021 include a gain of $3.3 million related to an adjustment to the liabilities assumed as part of the Gain acquisition initially determined values, as of August 1, 2020. The results of the year ended September 30, 2020 included gain on acquisitions of $81.9 million, principally related to the acquisition of Gain.

Provision for Taxes: The effective income tax rate was 25% in the year ended September 30, 2021 compared to 18% in the year ended September 30, 2020. The gains on acquisitions of $3.3 million and $81.9 million in the year ended September 30, 2021 and 2020, respectively, were not taxable and reduced the effective income tax rate 0.5% and 8.3% in the year ended September 30, 2021 and 2020, respectively.

The effective income tax rate for the year ended September 30, 2021 was higher than the U.S. federal statutory rate of 21% due to U.S. state and local taxes, global intangible low-taxed income (“GILTI”), U.S. and foreign permanent differences, and the amount of foreign earnings taxed at higher tax rates. The effective rate for the year ended September 30, 2020 was lower than the U.S. federal statutory rate of 21% due to the non-taxable gain recognized upon the acquisition of Gain.

41

Table of Contents

Variable vs. Fixed Expenses

The table below sets forth our variable expenses and non-variable expenses as a percentage of total non-interest expenses for the periods indicted.

Our variable expenses include variable compensation paid to traders and risk management consultants, bonuses paid to operational, administrative, and executive employees, transaction-based clearing expenses and introducing broker commissions. We seek to make our non-interest expenses variable to the greatest extent possible, and to keep our fixed costs as low as possible.

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.

During the year ended September 30, 2021, non-variable expenses, excluding bad debts, net of recoveries and impairment, increased $183.5 million, or 43%, compared to the year ended September 30, 2020, principally driven by incremental costs from the Gain acquisition in the fourth quarter of the year ended September 30, 2020.

Segment Information

Our operating segments are based principally on the nature of the clients we serve (commercial, institutional, and retail), and a fourth operating segment, our global payments business. We manage our business in this manner due to our large global footprint, in which we have more than 3,600 employees allowing us to serve clients in more than 180 countries.

Our business activities are managed as operating segments and organized into reportable segments as shown below.

Operating revenues, net operating revenues, net contribution and segment income are some of the key measures used by management to assess the performance of each segment and for decisions regarding the allocation of our resources. Operating revenues are calculated as total revenues less cost of sales of physical commodities.

Net operating revenue 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. Variable compensation paid to risk management consultants and traders generally represents a fixed percentage, that can vary by revenue type, of an amount equal to revenues generated, and in some cases, revenues generated less transaction-based clearing expenses, base salaries and an overhead allocation.

Segment income is calculated as net contribution less non-variable direct segment costs. These non-variable direct expenses include trader base compensation and benefits, operational charges, trading systems and market information, professional fees, travel and business development, communications, bad debts, trade errors and direct marketing expenses.

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.

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. 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.

Year Ended September 30, 2021 Compared to Year Ended September 30, 2020

Net contribution for all of our business segments increased $229.2 million, or 36%, to $868.7 million in the year ended September 30, 2021 compared to $639.5 million in the year ended September 30, 2020. Segment income increased $111.1 million, or 28%, to $506.2 million in the year ended September 30, 2021 compared to $395.1 million in the year ended September 30, 2020.

43

Table of Contents

Commercial

We offer our commercial clients a comprehensive array of products and services, including risk management and hedging services, execution and clearing of exchange-traded and OTC products, voice brokerage, market intelligence and physical trading, as well as commodity financing and logistics services. We believe our ability to provide these high-value-added products and services differentiates us from our competitors and maximizes our ability to retain our clients.

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.

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. Net operating revenues increased $153.4 million, or 35%, to $586.5 million in the year ended September 30, 2022 compared to $433.1 million in the year ended September 30, 2021.

Operating revenues derived from listed derivatives increased $17.0 million, or 8%, to $240.5 million in the year ended September 30, 2022 compared to $223.5 million in the year ended September 30, 2021. 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.

Operating revenues derived from OTC transactions increased $64.9 million, or 45%, to $208.3 million in the year ended September 30, 2022 compared to $143.4 million in the year ended September 30, 2021. This increase was driven by a 16% increase in OTC volumes, primarily in agricultural and soft commodities as well as a 27% increase in the average rate per contract as a result of wider spreads in FX hedging and energy and renewable fuels markets.

Operating revenues derived from physical transactions increased $48.2 million, or 36%, to $180.4 million in the year ended September 30, 2022 compared to $132.2 million in the year ended September 30, 2021, principally due to increased client activity in agricultural and energy commodities as well as continued strong client demand for precious metals. Operating revenues during the year ended September 30, 2022 were favorably impacted by realized gains of $1.7 million on the sale of physical inventories carried at the lower of cost or net realizable value, for which losses on related derivative positions were recognized in prior periods. Operating revenues during the year ended September 30, 2021 included unrealized losses on derivative positions held against physical inventories carried at the lower of cost or net realizable value of $2.2 million, and sold in subsequent quarters. In addition, the year ended September 30, 2021 included a $1.9 million loss on the liquidation of certain physical inventories of crude oil and low sulfur fuel oil as a result of quality degradation and additional costs to sell.

Interest and fee income earned on client balances increased $26.7 million, or 183%, to $41.3 million in the year ended September 30, 2022 compared to $14.6 million in the year ended September 30, 2022, as result of both a 30% increase in average client equity to $2,149 million as well as an increase in short term interest rates.

Variable expenses, excluding interest, expressed as a percentage of operating revenues declined to 37% in the year ended September 30, 2022 compared to 42% in the year ended September 30, 2021, primarily as the result of the increase in interest income.

Segment income increased $96.1 million, or 50%, to $288.3 million in the year ended September 30, 2022 compared to $192.2 million in the year ended September 30, 2021, principally driven by the growth in operating revenues which was partially offset by a $16.5 million increase in other fixed expenses and a $3.1 million increase in bad debts, net of recoveries and impairment. The increase in other fixed expenses principally related to a $4.0 million increase in shared service allocations, a $3.2 million increase in travel and business development, a $2.8 million increase in professional fees, a $1.9 million increase in insurance expense and a $1.5 million increase in selling and marketing.

Year Ended September 30, 2021 Compared to Year Ended September 30, 2020

Operating revenues increased $103.3 million, or 24%, to $534.8 million in the year ended September 30, 2021 compared to $431.5 million in the year ended September 30, 2020. Net operating revenues increased $79.7 million, or 23%, to $433.1 million in the year ended September 30, 2021 compared to $353.4 million in the year ended September 30, 2020.

Operating revenues derived from listed derivatives increased $46.6 million, or 26%, to $223.5 million in the year ended September 30, 2021 compared to $176.9 million in the year ended September 30, 2020. This increase was principally driven by a 26% increase in the average rate per contract, as well as a 6% increase in contract volumes as a result of increased volatility in agricultural and base metal markets. This increase was partially offset by a $6.7 million decline in derivative voice brokerage revenues.

Operating revenues derived from OTC transactions increased $32.4 million, or 29%, to $143.4 million in the year ended September 30, 2021 compared to $111.0 million in the year ended September 30, 2020. This increase was driven by a 21% increase in OTC volumes as well as a 7% increase in the average rate per contract as a result of increased client activity in agricultural markets.

Operating revenues derived from physical transactions increased $22.6 million, or 21%, to $132.2 million in the year ended September 30, 2021 compared to $109.6 million in the year ended September 30, 2020, principally due to increased client activity in agricultural and energy commodities as well as continued strong client demand for precious metals. The years ended September 30, 2021 and 2020 include unrealized losses on derivative positions held against physical inventories carried at the lower of cost or net realizable value of $2.2 million and $0.7 million, respectively. In addition, the years ended September 30, 2021 and 2020 included losses on the liquidation of certain physical inventories of crude oil and low sulfur fuel oil as a result of quality degradation and additional costs to sell of $1.9 million and $7.6 million, respectively.

Interest and fee income earned on client balances was $14.6 million and $14.5 million, respectively, in the years ended September 30, 2021 and 2020. A 62% increase in average client equity to $1,648 million was offset by a significant decline in short term interest rates.

Variable expenses, excluding interest, expressed as a percentage of operating revenues was 42% in the year ended September 30, 2021 compared to 41% in the year ended September 30, 2020.

45

Table of Contents

Segment income increased $50.3 million, or 35%, to $192.2 million in the year ended September 30, 2021 compared to $141.9 million in the year ended September 30, 2020, principally driven by the growth in operating revenues which was partially offset by a $1.4 million increase in fixed compensation and benefits as well as a $5.6 million increase in other fixed expenses including a $1.6 million increase in professional fees and a $1.2 million increase in trading systems and market information.

46

Table of Contents

Institutional

We provide institutional clients with a complete suite of equity trading services to help them find liquidity with best execution, consistent liquidity across a robust array of fixed income products, competitive and efficient clearing and execution in all major futures and securities exchanges globally as well as prime brokerage in equities and major foreign currency pairs and swap transactions. In addition, we originate, structure and place debt instruments in the international and domestic capital markets. These instruments include asset-backed securities (primarily in Argentina) and domestic municipal securities.

The tables below present the financial performance, a disaggregation of operating revenues, and select operating data and metrics used by management in evaluating the performance of the Institutional segment, for the periods indicated.

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. Net operating revenues increased $64.1 million, or 15%, to $483.5 million in the year ended September 30, 2022 compared to $419.4 million in the year ended September 30, 2021.

Operating revenues derived from listed derivatives increased $25.9 million, or 16%, to $190.0 million in the year ended September 30, 2022 compared to $164.1 million in the year ended September 30, 2021, principally driven by a 13% increase in listed derivative contract volumes compared to the year ended September 30, 2021, as a result of both an increase in market volatility as well as an increase in the number of clients in this business. This was partially offset by a 1% decline in the average rate per contract in the year ended September 30, 2022 compared to the year ended September 30, 2021.

Operating revenues derived from securities transactions increased $77.4 million, or 18%, to $513.4 million in the year ended September 30, 2022 compared to $436.0 million in the year ended September 30, 2021. The ADV of securities traded increased 25%, principally driven by increased client activity in fixed income markets and to a lesser extent equity products. The RPM traded declined 5% in the year ended September 30, 2022 compared to the year ended September 30, 2021.

Operating revenues derived from FX contracts increased $12.3 million, or 76%, to $28.4 million in the year ended September 30, 2022 compared to $16.1 million in the year ended September 30, 2021, primarily driven by a 142% increase in the ADV of FX contracts traded as a result of heightened volatility in global FX markets. The effect of the increase in ADV was partially offset by a 26% decline in the average rate per contract due to changes in product and client mix.

Finally, interest and fee income earned on client balances, which is associated with our listed derivative business, as well as our correspondent clearing and independent wealth management businesses, increased $35.9 million, or 352%, to $46.1 million in the year ended September 30, 2022 compared to $10.2 million in the year ended September 30, 2021, as result of a 62% increase in average client equity and a 21% increase in average FDIC sweep client balances combined with a significant increase in short term interest rates.

As a result of the increase in short term interest rates and the increase in ADV, interest expense increased 205% compared to the prior year, with interest expense directly associated with serving as an institutional dealer in fixed income securities increasing $52.7 million, interest paid to clients increasing $14.5 million and interest expense directly attributable to securities lending activities increasing $5.4 million compared to the prior year period.

Variable expenses, excluding interest, expressed as a percentage of operating revenues declined to 51% in the year ended September 30, 2022 compared to 55% in the year ended September 30, 2021, primarily as the result of the increase in interest income.

Segment income increased $6.9 million, or 4%, to $174.6 million in the year ended September 30, 2022 compared to $167.7 million in the year ended September 30, 2021, primarily as a result of the increase in net operating revenues noted above, which was partially offset by a $26.1 million, or 28% increase in non-variable direct expenses, excluding bad debts versus the year ended September 30, 2021. 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.

Year Ended September 30, 2021 Compared to Year Ended September 30, 2020

Operating revenues increased $44.3 million, or 7%, to $668.4 million in the year ended September 30, 2021 compared to $624.1 million in the year ended September 30, 2020. Net operating revenues increased $55.6 million, or 15%, to $419.4 million in the year ended September 30, 2021 compared to $363.8 million in the year ended September 30, 2020.

Operating revenues derived from listed derivatives increased $12.5 million, or 8%, to $164.1 million in the year ended September 30, 2021 compared to $151.6 million in the year ended September 30, 2020, principally driven by an 18% increase in the average rate per contract, which was partially offset by an 8% decline in listed derivative contract volumes in the year ended September 30, 2021 compared to the year ended September 30, 2020.

Operating revenues derived from securities transactions increased $59.9 million, or 16%, to $436.0 million in the year ended September 30, 2021 compared to $376.1 million in the year ended September 30, 2020. The ADV of securities traded increased 61%, principally driven by increased client activity in fixed income markets and to a lesser extent equity products, however the RPM traded declined 28% in the year ended September 30, 2021 principally driven by lower spreads in fixed income products compared to the year ended September 30, 2020 which benefited from wider spreads driven by the onset of the COVID-19 pandemic.

48

Table of Contents

Operating revenues derived from FX contracts declined $7.9 million, or 33%, to $16.1 million in the year ended September 30, 2021 compared to $24.0 million in the year ended September 30, 2020, as a 25% increase in the ADV of FX contracts traded was more than offset by a 47% decline in the average rate per contract due to a decline in foreign currency volatility.

Finally, interest and fee income earned on client balances, which is associated with our listed derivative business, as well as our correspondent clearing and independent wealth management businesses, declined $16.3 million, or 62%, to $10.2 million in the year ended September 30, 2021 compared to $26.5 million in the year ended September 30, 2020, principally as a result of a significant decline in short term interest rates. Partially offsetting the decline in short term interest rates was a 26% increase in average client equity and a 30% increase in average FDIC sweep client balances.

Also primarily as a result of the decline in short term interest rates, interest expense declined 48% compared to the prior year, with interest expense directly associated with serving as an institutional dealer in fixed income securities declining $23.9 million and interest expense directly attributable to securities lending activities declining $7.4 million compared to the prior year period.

Variable expenses, excluding interest, expressed as a percentage of operating revenues increased to 55% in the year ended September 30, 2021 compared to 49% in the year ended September 30, 2020, primarily as the result of the decline in interest income and higher variable compensation.

Segment income increased $14.8 million, or 10%, to $167.7 million in the year ended September 30, 2021 compared to $152.9 million in the year ended September 30, 2020, primarily as a result of the increase in operating revenues noted above as well as a $9.2 million decline in bad debt expenses as compared to the year ended September 30, 2020. Non-variable direct expenses, excluding bad debts, increased $6.4 million, or 7% versus the year ended September 30, 2020, primarily related to an increase in market information, professional fees and depreciation of internally developed software which was partially offset by lower travel and business development expenses.

49

Table of Contents

Retail

We provide our retail clients around the world access to over 18,000 global financial markets, including spot foreign exchange ("forex") and CFDs, which are investment products with returns linked to the performance of underlying assets, and both financial trading and physical investment in precious metals. In addition, our independent wealth management business offers a comprehensive product suite to retail investors in the United States.

The tables below present the financial performance, a disaggregation of operating revenues, and select operating data and metrics used by management in evaluating the performance of the Retail segment, for the periods indicated.

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.

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 $78.7 million, or 23%, to $426.7 million in the year ended September 30, 2022 compared to $348.0 million in the year ended September 30, 2021. Net operating revenues increased $80.5 million, or 36%, to $302.9 million in the year ended September 30, 2022 compared to $222.4 million in 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.

50

Table of Contents

Operating revenues derived from securities transactions, which are related to our independent wealth management activities, declined $0.6 million, or 1%, to $97.0 million in the year ended September 30, 2022 compared to $97.6 million in the year ended September 30, 2021.

Operating revenues derived from physical contracts declined $6.5 million, or 32%, to $13.9 million in the year ended September 30, 2022 compared to $20.4 million in the year ended September 30, 2021, with the comparative prior year period reflecting a strong performance related to heightened client activity caused by the Covid-19 pandemic.

Interest and fee income earned on client balances increased $0.7 million, or 58%, to $1.9 million primarily as a result of an increase in short term interest rates.

Variable expenses, excluding interest, as a percentage of operating revenues were 34% in the year ended September 30, 2022 compared to 41% in the year ended September 30, 2021, with the decrease in the variable rate percentage being driven by the strong growth in operating revenues derived from FX/CFD contracts which has a lower variable rate cost base.

Segment income increased $47.6 million, or 70%, to $115.4 million in the year ended September 30, 2022 compared to $67.8 million in the year ended September 30, 2021, primarily as a result of the increase in net operating revenues noted above, as well as a $6.4 million foreign exchange antitrust class action settlement received in the year ended September 30, 2022 in our Retail forex business. Non-variable direct expenses increased $34.7 million, or 25%, compared to the year ended September 30, 2021. The increase in non-variable direct expenses, was primarily a result of a $14.9 million increase in selling and marketing expenses, a $4.1 million increase in fixed compensation and benefits, a $3.6 million increase depreciation and amortization, a $2.5 million increase in trading systems and market information, a $1.9 million increase in travel and business development and a $1.4 million increase in professional fees.

Year Ended September 30, 2021 Compared to Year Ended September 30, 2020

Operating revenues increased $208.0 million, or 149%, to $348.0 million in the year ended September 30, 2021 compared to $140.0 million in the year ended September 30, 2020. Net operating revenues increased $158.6 million, or 249%, to $222.4 million in the year ended September 30, 2021 compared to $63.8 million in the year ended September 30, 2020.

Operating revenues derived from FX / CFD contracts increased $183.0 million, or 427% to $225.9 million, and represent the incremental revenues from the acquisition of Gain, effective August 1, 2020. For Gain, the year ended September 30, 2021 includes 259 trading days compared to 43 trading days post acquisition, during the year ended September 30, 2020.

Operating revenues derived from securities transactions relates to our independent wealth management activities which increased $15.4 million, or 19%, to $97.6 million in the year ended September 30, 2021 compared to $82.2 million in the year ended September 30, 2020.

Operating revenues derived from physical contracts increased $7.6 million, or 59%, to $20.4 million in the year ended September 30, 2021 compared to $12.8 million in the year ended September 30, 2020, principally driven by continued strong client demand for precious metals related to the Covid-19 pandemic.

Interest and fee income earned on client balances declined $0.5 million, or 29%, to $1.2 million primarily as a result of the decline in short term interest rates.

Variable expenses, excluding interest, as a percentage of operating revenues were 41% in the year ended September 30, 2021 compared to 57% in the year ended September 30, 2020, with the decrease in the variable rate percentage being driven by the Gain acquisition effective August 1, 2020, which brought a large lower variable rate cost base.

Segment income increased $36.1 million, or 114% to $67.8 million in the year ended September 30, 2021 compared to $31.7 million in the year ended September 30, 2020, primarily as a result of the increase in net operating revenues noted above. The increase in non-variable direct expenses, was primarily a result of incremental costs from the Gain acquisition.

51

Table of Contents

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 payments services in more than 185 countries and 140 currencies, which we believe is more than any other payments solutions provider.

The tables below present the financial performance, a disaggregation of operating revenues, and select operating data and metrics used by management in evaluating the performance of the Global Payments segment for the periods indicated.

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 $34.7 million, or 25%, to $172.0 million in the year ended September 30, 2022 compared to $137.3 million in the year ended September 30, 2021. Net operating revenues increased $32.6 million, or 25%, to $162.5 million in the year ended September 30, 2022 compared to $129.9 million in the year ended September 30, 2021.

The increase in operating revenues was primarily driven by a 15% increase in the average daily volume as well as a 10% increase in the RPM traded compared to the year ended September 30, 2021.

Variable expenses, excluding interest, expressed as a percentage of operating revenues were 24% in both the years ended September 30, 2022 and 2021.

Segment income increased $18.9 million, or 24%, to $97.4 million in the year ended September 30, 2022 compared to $78.5 million in the year ended September 30, 2021. 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.

Year Ended September 30, 2021 Compared to Year Ended September 30, 2020

Operating revenues increased $19.9 million, or 17%, to $137.3 million in the year ended September 30, 2021 compared to $117.4 million in the year ended September 30, 2020. Net operating revenues increased $18.4 million, or 17% to $129.9 million in the year ended September 30, 2021 compared to $111.5 million in the year ended September 30, 2020.

The increase in operating revenues was primarily driven by a 20% increase in the average daily volume which was partially offset by a 2% decline in the RPM traded.

Variable expenses, excluding interest, expressed as a percentage of operating revenues were 24% in both the year ended September 30, 2021 and the year ended September 30, 2020.

Segment income increased $9.9 million, or 14%, to $78.5 million in the year ended September 30, 2021 compared to $68.6 million in the year ended September 30, 2020. This increase primarily resulted from the increase in net operating revenues, partially offset by a $4.2 million increase in non-variable direct expenses versus the prior year period, which includes a $2.9 million increase in fixed compensation and benefits.

Unallocated Costs and Expenses

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

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. Compensation and benefits increased $22.0 million, or 14%, to $178.7 million in the year ended September 30, 2022 compared to $156.7 million in the year ended September 30, 2021.

During the year ended September 30, 2022, the increase in variable compensation and benefits was principally related to higher incentives driven by increased company performance over the prior year. 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.

During the year ended September 30, 2022, the increase in non-trading technology and support is principally due to an increase in non-trading software licensing and maintenance costs within our IT department. During the year ended September 30, 2022, the increase in selling and marketing expenses is principally due to the costs of holding our bi-annual global sales and strategy meeting in March 2022. During the year ended September 30, 2022, the increase in travel and business development is principally due to increased travel among the support functions with the lifting of certain social distancing and travel restrictions, following periods of limited travel due to responses by governments and societies to the COVID-19 pandemic.

Year Ended September 30, 2021 Compared to Year Ended September 30, 2020

Total unallocated costs and other expenses increased $54.9 million, or 22%, to $300.7 million in the year ended September 30, 2021 compared to $245.8 million in the year ended September 30, 2020. Compensation and benefits increased $29.4 million, or 23%, to $156.7 million in the year ended September 30, 2021 compared to $127.3 million in the year ended September 30, 2020.

During the year ended September 30, 2021, the increase in fixed compensation and benefits was primarily related to the increase in headcount, principally due to the acquisition of Gain, across nearly all administrative departments, including IT, compliance, accounting, human resources, as well as credit and risk. Fixed compensation and benefits during the year ended September 30, 2021 include severance costs of $3.5 million, principally due to the departure of certain senior officers. During the year ended September 30, 2020, severance costs were $0.5 million.

During the year ended September 30, 2021, the increase in other expenses is primarily due higher occupancy costs, principally related to an increase in leased office space. Additionally, non-trading technology and support increased due to higher support and maintenance costs related to various IT, client engagement, accounting, and human resources systems.

Liquidity, Financial Condition and Capital Resources

Overview

Liquidity is our ability to generate sufficient funding to meet all of our cash needs. Liquidity is of critical importance to us and imperative to maintaining our operations on a daily basis. Senior management establishes liquidity and capital policies, which we monitor and review for funding from both internal and external sources. We continuously evaluate how effectively our policies support our business operations. We have historically financed our liquidity and capital needs principally with funds generated from our subsidiaries' operations, issuing debt and equity securities, and accessing committed credit facilities. We plan to finance our future operating liquidity and regulatory capital needs in a manner consistent with our past practice. Liquidity and capital matters are reported regularly to our Board of Directors.

Regulatory

StoneX Financial Inc. is registered as a broker-dealer with the SEC and is a member of both FINRA and MSRB. In addition, StoneX Financial Inc. is registered as a futures commission merchant with the CFTC and NFA, and a member of various commodities and futures exchanges in the U.S. and abroad. StoneX Financial Inc. has a responsibility to meet margin calls at all exchanges on a daily basis, and even on an intra-day basis, if deemed necessary by relevant regulators or exchanges. We require our clients to make margin deposits the next business day, and we require our largest clients to make intra-day margin payments during periods of significant price movement. Margin required to be posted to the exchanges is a function of our clients’ net open positions and required margin per contract. StoneX Financial Inc. is subject to minimum capital requirements under Section 4(f)(b) of the Commodity Exchange Act, Part 1.17 of the rules and regulations of the CFTC and the SEC Uniform Net Capital Rule 15c3-1 under the Securities Exchange Act of 1934. StoneX Financial Inc. is also subject to the Rule 15c3-3 of the Securities Exchange Act of 1934, as amended (“Customer Protection Rule”).

Gain Capital Group, LLC is registered as both a futures commission merchant and registered foreign exchange dealer, subject to minimum capital requirements under Section 4(f)(b) of the Commodity Exchange Act, Part 1.17 of the rules and regulations of the CFTC and NFA Financial Requirements, Sections 1 and 11.

54

Table of Contents

StoneX Markets LLC is a CFTC provisionally registered swap dealer, whose business is overseen by the NFA. CFTC 23.154, Calculation of Initial Margin rules impose 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. Additionally, the CFTC finalized the proposed net capital rules applicable to swap dealers on July 22, 2020, with the new rules effective October 6, 2021.

These rules specify the minimum amount of capital that must be available to support our clients’ account balances and open trading positions, including the amount of assets that StoneX Financial Inc., Gain Capital Group, LLC and StoneX Markets LLC must maintain in relatively liquid form. Further, the rules are designed to maintain general financial integrity and liquidity.

StoneX Financial Ltd is regulated by the FCA, the regulator of the financial services industry in the U.K. and is subject to regulations which impose regulatory capital requirements. StoneX Financial Ltd is a member of various commodities and futures exchanges in the U.K. and Europe and has the responsibility to meet margin calls at all exchanges on a daily basis and intra-day basis, as necessary. StoneX Financial Ltd is required to be compliant with the U.K.’s ‘MIFIDPRU’ regulation. To comply with these standards, we have implemented daily liquidity procedures, conduct periodic reviews of liquidity by stressed scenarios, and are required to maintain enough liquidity for the firm to survive for one year under the appropriate stressed conditions.

The regulations discussed above limit funds available for dividends to us. As a result, we may be unable to access our operating subsidiaries’ funds when we need them.

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

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

As of 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, 2022, approximately 97% of our assets consisted of cash; securities purchased under agreements to resell; securities borrowed; deposits with and receivables from exchange-clearing organizations, broker-dealers, clearing organizations and counterparties; client receivables; marketable financial instruments and investments; and physical commodities inventory. All assets that are not client and counterparty 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. We are required to assess the need for deferred tax asset valuation allowances at each reporting period. We record a valuation allowance against deferred tax assets when it is considered more likely than not that we will not realize all or a portion of our deferred tax assets. 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 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.

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. We are indirectly exposed to the financing and liquidity risks of our clients and counterparties, including the risks that our clients and counterparties may not be able to finance their operations.

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

As it relates to OTC derivative transactions, we act as a principal, which exposes us to the credit risk of both our clients and the counterparties with which we offset our client positions. As with exchange-traded transactions, our OTC transactions require that we meet initial and variation margin payments on behalf of our clients before we receive related required payments from our clients. 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. Our clients are required to make any margin deposits the next business day, and we may require our largest clients to make intra-day margin payments during periods of significant price movement. In this business as well, we have the ability to increase the margin requirements for clients based on their open positions, trading activity, or market conditions. On a limited basis, we provide credit thresholds to certain clients, based on internal evaluations and monitoring of client creditworthiness.

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

We enter into securities purchased under agreements to resell, securities sold under agreements to repurchase, securities borrowed and securities loaned transactions to, among other things, finance financial instruments, acquire securities to cover short positions, acquire securities for settlement, and to accommodate counterparties’ needs. In connection with these agreements and transactions, it is our policy to receive or pledge cash or securities to adequately collateralize such agreements and transactions in accordance with general industry guidelines and practices. The collateral is valued daily and we may require counterparties to deposit additional collateral or return collateral pledged, when appropriate.

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”), an independent Commodity Trading Advisor (“CTA”), were liquidated in accordance with StoneX Financial Inc.’s client agreements and obligations under market regulation standards.  OptionSellers, in its role as a CTA, had been granted by each of its clients full discretionary authority to manage the trading in the client accounts, while StoneX Financial Inc. acted solely as the clearing firm in its role as the FCM.

StoneX Financial Inc.’s client agreements hold account owners liable for all losses in their accounts and obligate the account holders to reimburse StoneX Financial Inc. for any account deficits in their accounts. As of September 30, 2022, the receivable from these client accounts, net of collections and other allowable deductions was $25.9 million, with no individual account receivable exceeding $1.4 million. As of September 30, 2022, the allowance against these uncollected balances was $7.6 million. The Company is pursuing collection of the uncollected balances through arbitration proceedings against the account holders. The Company will consider developments in these proceedings, and any other relevant matters, in determining whether any changes in the allowance against the uncollected balances are required.

In these and other arbitration proceedings, clients are seeking damages from StoneX Financial Inc. relating to the trading losses in their accounts.

During the year ended September 30, 2022, we resolved several of these arbitration claims through arbitration decisions and privately negotiated settlements. All of the arbitration panels that issued decisions during the year awarded StoneX Financial Inc. the full amount of the uncollected balances. A portion of the panels also awarded relief to account holders. The amount of relief awarded was not material to us, individually or in the aggregate. As noted, several of the arbitrations were resolved through privately negotiated settlement, pursuant to which the account holders agreed to pay some or all of their outstanding deficit balances. In October 2022, we reached an additional privately negotiated settlement of an arbitration proceeding, pursuant to which the accounts holders agreed to pay all of their outstanding deficit balances and we made certain immaterial payments to the account holders. We intend to continue vigorously pursuing claims through arbitration and settling cases in what we determine to be appropriate circumstances. 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. 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.

Primary Sources and Uses of Cash

Our cash and cash equivalents and client cash and securities held for clients are held at banks, deposits at liquidity providers, investments in money market funds that invest in highly liquid investment grade securities including U.S. treasury bills, as well as investments in U.S treasury bills. In general, we believe all of our investments and deposits are of high credit quality and we have more than adequate liquidity to conduct our businesses.

Our assets and liabilities may vary significantly from period to period due to changing client requirements, economic and market conditions and our growth. Our total assets as of 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. 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 majority of the assets of StoneX Financial Inc., StoneX Financial Ltd, StoneX Markets LLC, and Gain Capital Group, LLC are restricted from being transferred to us or other affiliates due to specific regulatory requirements. This restriction has no current impact on our ability to meet our cash obligations, and no such impact is expected in the future.

We have liquidity and funding policies and processes in place that are intended to maintain sufficient flexibility to address both company-specific and industry liquidity needs. The majority of our excess funds is held with high-quality institutions, under highly liquid reverse repurchase agreements, U.S. government obligations, interest earning cash deposits and AA-rated money market investments.

We do not intend to distribute earnings of our foreign subsidiaries in a taxable manner, and therefore intend to limit distributions to earnings previously taxed in the U.S., or earnings that would qualify for the 100 percent dividends received deduction, and earnings that would not result in any significant foreign taxes. 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.

Senior Secured Notes

In June 2020, we issued $350.0 million in aggregate principal amount of our 8.625% Senior Secured Notes due 2025 (the “Notes”) at the offering price of 98.5% of the aggregate principal amount. We used the net proceeds from the sale of the Notes to fund the preliminary cash consideration for the acquisition of Gain, to pay certain related transactions fees and expenses, and to fund the repayment of Gain’s 5.00% Convertible Senior Notes due 2022, with the exception of $0.5 million which was redeemed in August 2022.

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. Interest on the Notes accrues at a rate of 8.625% per annum and is payable semiannually in arrears on June 15 and December 15 of each year. We incurred debt issuance costs of $9.5 million in connection with the issuance of the Notes, which are being amortized over the term of the Notes under the effective interest method.

During the year ended September 30, 2021, we repurchased $1.6 million of the principal amount of the Notes, for 103% of the principal amount, plus accrued and unpaid interest.

We have had the right, since June 15, 2022, to redeem the Notes, in whole or in part, at the redemption prices set forth in the indenture.

Committed Credit Facilities

As of September 30, 2022, we had four committed bank credit facilities, totaling $1,000.0 million, of which $477.0 million was outstanding. Additional information regarding our bank credit facilities can be found in Note 11 of the Consolidated Financial Statements. The credit facilities include:

•A three-year first-lien senior secured syndicated loan facility is available to us for general working capital requirements and capital expenditures. The facility was amended on April 21, 2022 to replace the revolving credit facility and Term Loan A facility with a $475.0 million revolving credit facility and extend the maturity date to April 21, 2025. The amended facility includes interest at the Secured Overnight Financing Rate (“SOFR”) plus a spread and is secured by substantially all of our subsidiaries assets. Prior to the amendment, the Company was required to make quarterly principal payments against the Term Loan equal to 1.25% of the original balance. During the year ended September 30, 2022, prior to its replacement, the Company made scheduled quarterly principal payments against the Term Loan equal to $4.9 million.

•An unsecured committed line of credit until March 31, 2023, under which $75.0 million is available to our wholly owned subsidiary, StoneX Financial Inc. to provide short term funding of margin to commodity exchanges as necessary.

•A syndicated committed borrowing facility is available to our wholly owned subsidiary, StoneX Commodity Solutions LLC (“StoneX Commodity Solutions”) to finance commodity financing arrangements and commodity repurchase

57

Table of Contents

agreements. The facility was amended on July 28, 2022 to increase the amount available from $325.0 million to $400.0 million and extend the maturity date to July 28, 2024.

•An unsecured syndicated loan facility, under which our subsidiary, StoneX Financial Ltd is entitled to borrow up to $50.0 million, subject to certain terms and conditions of the credit agreement. This facility is intended to provide short-term funding of margin to commodity exchanges as necessary. During November 2022, the facility was renewed to extend the maturity date to October 14, 2023.

Additional information regarding the committed bank credit facilities can be found in Note 11 of the Consolidated Financial Statements. As reflected above, one of our committed credit facilities is scheduled to expire during the year ending September 30, 2023. We intend to renew or replace this facility as it expires, and based on our liquidity position and capital structure, we believe we will be able to do so.

As of September 30, 2022, we had four uncommitted bank credit facilities with no outstanding balance. The credit facilities include:

•A secured uncommitted loan facility under which StoneX Financial Inc. may borrow up to $75.0 million, collateralized by commodity warehouse receipts, to facilitate U.S. commodity exchange deliveries of its clients, subject to certain terms and conditions of the credit agreement. There were no borrowings outstanding under this credit facility at September 30, 2022 and 2021.

•A secured uncommitted loan facility under which StoneX Financial Inc. may borrow up to $100.0 million for short term funding of firm and client margin requirements, subject to certain terms and conditions of the agreement. The borrowings are secured by first liens on firm owned marketable securities or client owned securities which have been pledged to us under a clearing arrangement. There were no borrowings outstanding under this credit facility at September 30, 2022 and 2021.

•A secured uncommitted loan facility under which StoneX Financial Inc. may borrow for short term funding of proprietary and client securities margin requirements, subject to certain terms and conditions of the agreement. The uncommitted amount available to be borrowed is not specified, and all requests for borrowing are subject to the sole discretion of the lender. The borrowings are secured by first liens on firm owned marketable securities or client owned securities which have been pledged to us. The amounts borrowed under the facilities are payable on demand. There were no borrowings outstanding under this credit facility as of September 30, 2022 and 2021.

•During the year ended September 30, 2022, we executed a secured, uncommitted loan facility, under which StoneX Financial Ltd may borrow up to $45.0 million, collateralized by commodities warehouse receipts, to facilitate the financing of inventory of commodities, subject to certain terms and conditions of the credit agreement. There were $0.0 million and $25.0 million in borrowings outstanding under this credit facility as of September 30, 2022 and 2021, respectively.

Our facility agreements contain certain financial covenants relating to financial measures on a consolidated basis, as well as on a stand-alone subsidiary basis, in certain cases, including minimum tangible net worth, minimum regulatory capital, minimum net unencumbered liquid assets, maximum net loss, minimum fixed charge coverage ratio and maximum funded debt to net worth ratio. Failure to comply with any such covenants could result in the debt becoming payable on demand. As of September 30, 2022, we and our subsidiaries are in compliance with all of our financial covenants under the outstanding facilities.

In accordance with required disclosure as part of our three-year syndicated revolving loan facility, during the trailing twelve months ended 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.

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. Additional information on our subsidiaries subject to significant net capital and minimum net capital requirements can be found in Note 21 of the Consolidated Financial Statements.

Our subsidiary, StoneX Markets LLC, is a CFTC provisionally registered swap dealer, and under these capital rules is subject to a minimum regulatory capital requirement of $20.0 million for the first time during the year ended September 30, 2022. The Dodd-Frank Act created a regulatory regime governing OTC swaps and imposed further regulations on listed derivatives. During 2016, CFTC 23.154, Calculation of Initial Margin rules came into effect, imposing new requirements on registered

58

Table of Contents

swap dealers and certain counterparties to exchange initial margin, with phased-in compliance dates, with StoneX Markets LLC falling in the final compliance date tier of September 2022.

Compliance with this or other swap-related regulatory capital requirements may require us to devote more capital to these businesses or otherwise restructure our operations, such as by combining these businesses with other regulated subsidiaries that must also satisfy regulatory capital requirements. StoneX Markets LLC has faced, and may continue to face, increased costs due to the registration and regulatory requirements listed above, as may any other of our subsidiaries that may be required to register, or may register voluntarily, as a swap dealer and/or swap execution facility.

Cash Flows

We include client cash and securities 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. Treasury securities held with third-party banks or pledged with exchange-clearing organizations representing investments of client funds or which are held for particular clients in lieu of cash margin are included in the beginning and ending cash balances reconciled on our consolidated statements of cash flows to the extent that they have an original or acquired maturity of 90 days or less and, therefore, meet the definition of a segregated cash equivalent. Purchases and sales of U.S. Treasury securities representing investment of clients’ funds and U.S. Treasury securities pledged or redeemed by particular clients in lieu of cash margin are presented as operating uses and sources of cash, respectively, within the operating section of the consolidated statements of cash flows if they have an original or acquired maturity of greater than 90 days. Typically, there is an offsetting use or source of cash related to the change in the payables to clients. However, we will report a use of cash in periods where segregated U.S. Treasury securities that meet the aforementioned definition of a segregated cash equivalent mature and are replaced with U.S. Treasury securities that have original or acquired maturities that are greater than 90 days.

Our cash, segregated cash, cash equivalents, and segregated cash equivalents 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. Net cash of $229.5 million was used by operating activities, including movements typical of our operations, with large changes coming from payables to clients, funds with broker dealers and clearing organizations, as well as securities sold.

In the broker-dealer and related trading industries, companies report trading activities in the operating section of the statement of cash flows. Due to the daily price volatility in the commodities market, as well as changes in margin requirements, fluctuations in the balances of deposits held at various exchanges, marketable securities and client commodity accounts may occur from day-to-day. A use of cash, as calculated on the consolidated statement of cash flows, includes unrestricted cash transferred and pledged to the exchanges or guaranty funds. These funds are held in interest-bearing deposit accounts at the exchanges, and based on daily exchange requirements, may be withdrawn and returned to unrestricted cash. Additionally, within our unregulated OTC and foreign exchange operations, cash deposits received from clients are reflected as cash provided from operations. Subsequent transfer of these cash deposits to counterparties or exchanges to margin their open positions will be reflected as an operating use of cash to the extent the transfer occurs in a different period than the cash deposit was received.

Unrealized gains and losses on open positions revalued at prevailing foreign currency exchange rates are included in trading revenue but have no direct impact on cash flow from operations. Similarly, gains and losses become realized when client transactions are liquidated, though they do not affect cash flow. To some extent, the amount of net deposits made by our clients in any given period is influenced by the impact of gains and losses on our client balances, such that clients may be required to post additional funds to maintain open positions or may choose to withdraw excess funds on open positions.

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. Capital expenditures over the past three years have primarily included software development, core information technology hardware acquisitions, and leasehold improvements on office space.

Investing activities also include $0.2 million in cash payments for the acquisition of businesses during the year ended September 30, 2022 compared to $2.4 million during the year ended September 30, 2021 and $225.0 million during the year ended September 30, 2020. Further information about business acquisitions is contained in Note 20 to the Consolidated Financial Statements. These amounts were offset by smaller inflows related to sales of equipment and exchange membership stock, mainly in the year ended September 30, 2021.

Financing activities included $170.3 million outflow to settle secured term loans, more than offset by inflows related to our revolving lines of credit, primarily, of $211.5 million. Other inflows arose from stock option exercises and proceeds from greater than 90 day maturity loans, offset by various payments and repayments of loans with greater than 90 day maturities. 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. The repurchases are subject to the discretion of the senior management team to implement our stock repurchase plan, and subject to market conditions and as permitted by securities laws and other legal, regulatory and contractual requirements and covenants.

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

Contractual Obligations

The following table summarizes our cash payment obligations as of September 30, 2022:

(1) Represents an estimate of contractual purchase commitments in the ordinary course of business primarily for the purchase of precious metals and agricultural and energy commodities. 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. 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. Additional information on the funded status of these plans can be found in Note 17 of the Consolidated Financial Statements.

Based upon our current operations, we believe that cash flow from operations, available cash and available borrowings under our credit facilities will be adequate to meet our future liquidity needs.

Off Balance Sheet Arrangements

We are party to certain financial instruments with off-balance sheet risk in the normal course of business as a registered securities broker-dealer, futures commission merchant, U.K. based financial services firm, provisionally registered swap dealer and from our market-making and proprietary trading in the foreign exchange and commodities and debt securities markets. These financial instruments include futures, forward and foreign exchange contracts, exchange-traded and OTC options, To Be Announced (“TBA”) securities and interest rate swaps. Derivative financial instruments involve varying degrees of off-balance sheet market risk whereby changes in the fair values of underlying financial instruments may result in changes in the fair value of the financial instruments in excess of the amounts reflected in the Consolidated Balance Sheets. Exposure to market risk is influenced by a number of factors, including the relationships between the financial instruments and our positions, as well as the volatility and liquidity in the markets in which the financial instruments are traded. The principal risk components of financial instruments include, among other things, interest rate volatility, the duration of the underlying instruments and changes in commodity pricing and foreign exchange rates. We attempt to manage our exposure to market risk through various techniques. Aggregate market limits have been established and market risk measures are routinely monitored against these limits. Derivative contracts are traded along with cash transactions because of the integrated nature of the markets for such products. We manage the risks associated with derivatives on an aggregate basis along with the risks associated with our proprietary trading and market-making activities in cash instruments as part of our firm-wide risk management policies.

A significant portion of these instruments are primarily the execution of orders for commodity futures and options on futures contracts on behalf of our clients, substantially all of which are transacted on a margin basis. Such transactions may expose us to significant credit risk in the event margin requirements are not sufficient to fully cover losses which clients may incur. We control the risks associated with these transactions by requiring clients to maintain margin deposits in compliance with both clearing organization requirements and internal guidelines. We monitor required margin levels daily and, therefore, may require clients to deposit additional collateral or reduce positions when necessary. We also establish contract limits for clients, which are monitored daily. We evaluate each client’s creditworthiness on a case-by-case basis. Clearing, financing, and settlement activities may require us to maintain funds with or pledge securities as collateral with other financial institutions. Generally, these exposures to exchanges are subject to netting of open positions and collateral, while exposures to clients are subject to

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. Management believes that the margin deposits held are adequate to minimize the risk of material loss that could be created by positions held at that time. Additionally, we monitor collateral fair value on a daily basis and adjust collateral levels in the event of excess market exposure. Generally, these exposures to both counterparties and clients are subject to master netting agreements and the terms of the client agreements, which reduce our exposure.

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

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

Additionally, we hold options and futures on options contracts resulting from market-making and proprietary trading activities in these product lines. We assist clients in our commodities trading business to protect the value of their future production (precious or base metals) by selling them put options on an OTC basis. We also provide our physical commodities trading business clients with sophisticated option products, including combinations of buying and selling puts and calls. We mitigate our risk by effecting offsetting options with market counterparties or through the purchase or sale of exchange-traded commodities futures. The risk mitigation of offsetting options is not within the documented hedging designation requirements of the Derivatives and Hedging Topic of the ASC.

As part of the activities discussed above, we carry short positions. We sell financial instruments that we do not own, borrow the financial instruments to make good delivery, and therefore are obliged to purchase such financial instruments at a future date in order to return the borrowed financial instruments. We record these obligations in the 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. These positions are held to offset the risks related to financial assets owned, and reported in our Consolidated Balance Sheets in Financial instruments owned, at fair value, and Physical commodities inventory, net. We will incur losses if the fair value of the Financial instruments sold, not yet purchased, increases subsequent to September 30, 2022, which might be partially or wholly offset by gains in the value of assets held as of September 30, 2022. 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. We have a policy of reviewing the credit standing of each counterparty with which we conduct business. We have credit guidelines that limit our current and potential credit exposure to any one counterparty. We administer limits, monitor credit exposure, and periodically review the financial soundness of counterparties. We manage the credit exposure relating to our trading activities in various ways, including entering into collateral arrangements and limiting the duration of exposure. Risk is mitigated in certain cases by closing out transactions and entering into risk reducing transactions.

We are a member of various exchanges that trade and clear futures and option contracts. We are also a member of and provide guaranties to securities clearinghouses and exchanges in connection with client trading activities. Associated with our memberships, we may be required to pay a proportionate share of the financial obligations of another member who may default on its obligations to the exchanges. While the rules governing different exchange memberships vary, in general our guaranty obligations would arise only if the exchange had previously exhausted its resources. In addition, any such guaranty obligation would be apportioned among the other non-defaulting members of the exchange. Our liability under these arrangements is not quantifiable and could exceed the cash and securities we have posted as collateral at the exchanges. However, management believes that the potential for us to be required to make payments under these arrangements is remote. Accordingly, no contingent liability for these arrangements has been recorded in the 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. 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. GAAP requires that management make estimates and assumptions affecting reported amounts of assets and liabilities, disclosure of contingent liabilities at the date of the financial statements, as well as the recorded amounts of revenue and expenses during the reported period. The accounting policies discussed in this section are those that we consider the most critical to the financial statements. Therefore, understanding these policies is important to understanding our reported and potential future results of operations and financial position.

Valuation of Financial Instruments and Foreign Currencies

Description

Substantially all financial instruments are reflected in the consolidated financial statements at fair value, or amounts that approximate fair value due to their short-term nature or level of collateralization. These financial instruments include: cash and cash equivalents; cash, securities and other assets segregated under federal and other regulations; securities purchased under agreements to resell; securities borrowed; deposits with and receivables from broker-dealers, clearing organizations, and counterparties; financial instruments owned; securities sold under agreements to repurchase; securities loaned; and financial instruments sold, but not yet purchased. Unrealized gains and losses related to these financial instruments, when we are principal to the transaction, are reflected in earnings.

Foreign currency translation is an estimate critical to consolidating in our reporting currency. The value of certain assets and liabilities denominated in foreign currencies, including foreign currencies sold, not yet purchased, are converted into their U.S. dollar equivalents at the foreign exchange rates in effect at the close of business at the end of the accounting period. 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. 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. 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.

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. This view is supported by a few key factors:

•Valuations for substantially all of the financial instruments, most of which are in highly liquid markets, are available from independent, well-known publishers of market information.

•We have robust controls and procedures surrounding pricing and our various technologies involved in it.

•The relevant positions are generally short-term in nature.

•The Company holds positions in a wide range of products, such that an error in a limited number of prices is unlikely to cause a significant change to the overall result and pricing issues in a wide array of products is very unlikely.

Revenue Recognition

Description

A significant portion of our revenues are derived principally, from realized and unrealized trading income in securities, derivative instruments, commodities and foreign currencies purchased or sold for our account. We record realized and unrealized trading income on a trade date basis. We state financial instruments owned and financial instruments sold, not yet purchased and foreign currencies sold, not yet purchased, at fair value with related changes in unrealized appreciation or depreciation reflected in Principal gains, net in the Consolidated Income Statements. 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. We recognize revenues on a trade date basis for the transactions, as, typically, our obligation is met at that point and there are no future obligations to consider.

62

Table of Contents

We recognize revenue on commodities that are purchased for physical delivery to clients when we meet our obligations to our clients and in an amount equal to the consideration we expect to receive at that point in time.

Judgment and Uncertainties

Judgments, outside of the valuation considerations previously discussed, relate to the timing and appropriateness of revenue recognition and whether we have fulfilled our performance obligations.

Effect if Actual Results Differ From Assumptions

If we misapply the relevant guidance or incorrectly recognize revenue that we have not earned, earnings may be misstated. We do not believe that such a possibility is reasonably likely, because we have developed systems and controls for each of our businesses to capture all known transactions in the appropriate reporting period. In addition, the overwhelming majority of our revenue is recognized upon trade consummation, as we satisfy our performance obligations, and we do not need to estimate when that may have occurred.

Income Taxes

Description

We are subject to income taxes in the U.S. and numerous foreign jurisdictions.

Judgment and Uncertainties

Judgment is required in determining the consolidated income taxes and in evaluating tax positions, including evaluating income tax uncertainties. As a result, the company recognizes tax liabilities based on estimates of whether additional taxes and interest will be due. We do not currently have any uncertain tax positions.

Income taxes are accounted for under the asset and liability method, recognizing the estimated future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates in effect for the year in which those temporary differences are expected to be recovered or settled, with any change in tax rates recognized in income in the period that includes the enactment date. Management considers all relevant evidence for each jurisdiction to determine valuation allowances. If we change our determination as to the amount of deferred tax assets we expect to realize, we adjust our valuation allowance with a corresponding impact to income tax expense in the period in which such determination is made.

Effect if Actual Results Differ From Assumptions

We believe that our accruals for tax liabilities are adequate for all open audit years. This assessment relies on estimates and assumptions and may involve a series of judgments about future events. To the extent circumstances arise requiring us to change our judgment regarding the adequacy of existing tax accounts, we do not believe such a change is likely to be material to our financial statements. The tax accounts in total are relatively immaterial to the balance sheet, which, when combined with their likelihood of being misstated, particularly our valuation allowances given our positive earnings trend in recent years, results in a generally insignificant risk to us.

Accounting Standards Update

In October 2021, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2021-08, “Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers” (“ASU 2021-08”). 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. The standard is effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years, which means that it will be effective for our fiscal year beginning October 1, 2023. Early adoption is permitted. We do not believe that adoption of ASU 2021-08 will have a significant impact on our consolidated financial statements. We do not expect any other recently issued accounting pronouncements to have a significant effect on our financial statements.

63

Table of Contents