INTL FCStone Inc. (NASDAQ:INTL) Q1 2016 Earnings Conference Call - Preliminary Transcript
Feb 10, 2016 • 09:00 am ET
Our first question comes from Ali Mogharabi from Singular Research. Your line is open.
Hi guys. I'm actually sitting in for Jeremy Hellman. I'm looking at global payments volume - it increased nicely again, but the revenue per trade was down in the quarter year-over-year, so I was wondering, do you see that going forward, or do you see that reversing, as it did actually in Q4?
Well, I think we've pretty consistently been telling people for probably the better part of six quarters now that we anticipate that the revenue per contract or per trade in global currencies will decline at a steady rate, the reason for this being that as we get more of the bank transactions onboarded, these tend to be smaller in size than our traditional NGO segment, and the result of that is we make less per trade.
We did have an anomaly, which I think we discussed last time in the fourth quarter, that Q4 it actually went up. I think I was pretty clear and signaled to everyone that that was an anomaly. That was really a result of the kind of dislocation we're seeing in some of our key markets, where the spreads in the currencies really blew out. It was good for us, but not a sustainable situation.
So in summary, I think you should assume that we will see a small but steady decline in transaction per trade on the global currency side--global payments side, sorry. Does that make sense?
Thanks. Absolutely, that's very helpful. Then regarding overall, what are your thoughts about the uncertainty, of course which is macro driven, and the overall volatility we've been seeing in the markets? Do you expect that to continue throughout 2016? I guess I'm just trying to figure out what you guys--again, what you guys expect and what are you planning for, maybe possibly additional acquisitions and so forth. If you could provide any color on those, that'd be great.
Okay, well let me start off with my thoughts on market volatility. These are longer range kind of thoughts, and clearly quarter-to-quarter or month-to-month, you can have aberrations up or down, I guess. But my thought is we are heading for a period of increased volatility generally in all asset classes, which I think will go on for a long time. The reason for that is twofold. One, from a very macro point of view, the central bank intervention that we've seen over the last seven or eight years has had one of its purposes to reduce volatility in financial markets. As the Fed and perhaps some of the other central banks eventually start pulling out of the markets, that is going to cause volatility to increase, and I think that's what we're seeing here in the U.S. We haven't experience that yet in Europe or in Japan, but I think as that situation normalizes, and it's just started in the U.S. and may take a long time, that is going