Segment Analysis

The Company reports its operating segments based on services provided to customers. The Company’s business activities are managed as operating segments and organized into reportable segments as follows:


•	Commercial Hedging (includes components Financial Agricultural (Ag) & Energy and LME Metals)


•	Global Payments


•	Securities (includes components Equity Market-Making, Debt Trading, Investment Banking, and Asset Management)


•	Physical Commodities (includes components Precious Metals and Physical Ag & Energy)


•	Clearing and Execution Services (includes components Exchange-traded Futures & Options, FX Prime Brokerage, Correspondent Clearing, Independent Wealth Management, and Derivative Voice Brokerage)

The total revenues reported combine gross revenues for the physical commodities business for subsidiaries that are not broker-dealers and net revenues for all other businesses. In order to reflect the way that the Company’s management views the results, the table below also reflects the segment contribution to ‘operating revenues’, which is shown on the face of the condensed consolidated income statements and which is calculated by deducting physical commodities cost of sales from total revenues.

Segment data includes the profitability measure of net contribution by segment. Net contribution is one of the key measures used by management to assess the performance of each segment and for decisions regarding the allocation of the Company’s resources. Net contribution is calculated as revenue less direct cost of sales, transaction-based clearing expenses, variable compensation, introducing broker commissions, and interest expense. Variable compensation paid to risk management consultants/traders generally represents a fixed percentage of an amount equal to revenues generated, and in some cases, revenues produced less transaction-based clearing charges, base salaries and an overhead allocation.

Segment data also includes segment income which is calculated as net contribution less non-variable direct expenses of the segment. These non-variable direct expenses include trader base compensation and benefits, operational employee compensation and benefits, communication and data services, business development, professional fees, bad debt expense and other direct expenses.

Inter-segment revenues, charges, receivables and payables are eliminated upon consolidation, except revenues and costs related to foreign currency transactions undertaken on an arm’s length basis by the foreign exchange trading business for the securities business. The foreign exchange trading business competes for this business as it does any other business. If its rates are not competitive, the securities businesses buy or sell their foreign currency through other market counterparties.

On a recurring basis, the Company sweeps excess cash from certain U.S. operating segments to a centralized corporate treasury function in exchange for an intercompany receivable asset. The intercompany receivable asset is eliminated during consolidation, and therefore this practice may impact reported total assets between segments.

Information for the reportable segments is shown in accordance with the Segment Reporting Topic of the ASC as follows:



	Three Months Ended December 31,
(in millions)	2017			2016
Total revenues:
Commercial Hedging	$	61.5		$	57.5
Global Payments	24.6			23.1
Securities	43.0			37.4
Physical Commodities	7,716.6			5,898.7
Clearing and Execution Services	72.2			63.6
Corporate unallocated	0.7			(5.9		)
Total	$	7,918.6		$	6,074.4
Operating revenues (loss):
Commercial Hedging	$	61.5		$	57.5
Global Payments	24.6			23.1
Securities	43.0			37.4
Physical Commodities	10.6			9.8
Clearing and Execution Services	72.2			63.6
Corporate unallocated	0.7			(5.9		)
Total	$	212.6		$	185.5
Net operating revenues (loss):
Commercial Hedging	$	49.1		$	45.6
Global Payments	23.0			20.6
Securities	23.5			25.1
Physical Commodities	8.4			8.1
Clearing and Execution Services	27.4			24.1
Corporate unallocated	(1.1		)	(9.2		)
Total	$	130.3		$	114.3
Net contribution:
(Revenues less cost of sales of physical commodities, transaction-based clearing expenses, variable bonus compensation, introducing broker commissions and interest expense)
Commercial Hedging	$	36.5		$	33.4
Global Payments	18.4			16.4
Securities	17.8			19.8
Physical Commodities	5.6			5.8
Clearing and Execution Services	20.5			18.0
Total	$	98.8		$	93.4
Segment income:
(Net contribution less non-variable direct segment costs)
Commercial Hedging	$	21.1		$	15.4
Global Payments	14.6			13.2
Securities	11.0			12.9
Physical Commodities	1.1			3.0
Clearing and Execution Services	10.5			5.7
Total	$	58.3		$	50.2
Reconciliation of segment income to income before tax:
Segment income	$	58.3		$	50.2
Net costs not allocated to operating segments	39.7			41.8
Income before tax	$	18.6		$	8.4

(in millions)	As of December 31, 2017			As of September 30, 2017
Total assets:
Commercial Hedging	$	1,533.3		$	1,650.3
Global Payments	188.2			199.5
Securities	2,569.1			2,101.7
Physical Commodities	414.7			339.5
Clearing and Execution Services	2,005.1			1,818.9
Corporate unallocated	98.5			133.5
Total	$	6,808.9		$	6,243.4